Seed Round Shareholders Agreement

Why this «selectivity»? Well, it`s not because we`re a charity or we consider beer more important after signing (although, of course, it`s important:-). On the contrary, we consider the agreements reached in a substantive cycle as the legal basis for cooperation, hopefully long and close, between the founders and investors. Since the most important thing for this relationship is to develop its full potential, mutual trust is not to benefit from unilateral optimization of contracts (which contrasts with one-off transactions such as the full sale of a business where the parties separate before drying the ink). In the grand scheme of things, the «gain» of a particular clause, which is marginal to us, quickly becomes a Pyrrhic victory, if it even leaves the trace of an acid taste in the people who are the main reason for our investment. Founders and key collaborators are the main advantages of a startup. It is therefore not surprising that the shareholders` pact generally prohibits founders and management shareholders from competing with the company or recruiting employees or customers for the duration of the property and some time after the shareholder`s sale of the shares. Qualified majority can mean more. B of 50% of the votes of the founders and more than 50% of the votes of investors in the company. The aim is to ensure that the decision is in the interests of investors and founders. Of course, the participation of all shareholders in decision-making is a burden and should only apply to important decisions. As a general rule, qualified majority decisions are limited to situations such as leaving the company, appointing a new CEO, entering a joint venture, making significant investments, etc.

It should be stressed that no action in the normal activity should be subject to the requirements of a qualified majority. However, when selecting a suite for a start-up financing round, the following must be taken into account: the rights and obligations of existing investors to participate in future financing rounds can be defined in the shareholders` pact. It may be that. B investors have the right, but not the obligation, to participate in future financing cycles. As a general rule, the financing obligation is only applicable if the investment is deducted in increments. However, this is generally agreed in the investment agreement and not in the shareholders` pact. Since majority decision clauses should only serve as minority protection clauses, it is important to ensure that these clauses do not have undesirable adverse effects. One of the most common of these implications is that decision clauses disrupt decision-making in normal business decisions. Another potential problem is that someone (ab) uses the decision rules to obtain unwarranted benefits at the expense of other shareholders. Therefore, all majority decision-making obligations should be developed taking into account the business and the ownership of the company.

A shareholders` pact is an agreement between the founders, investors, management shareholders and the company. In the agreement, the parties define their agreement on corporate governance as well as the measures and procedures agreed in advance in certain situations. Each good agreement contains clear clauses on what happens in the event of a breach of contract. (And a great agreement contains rules so clear for everything that no one reads it.) As a general rule, there are clauses relating to notification of an offence, termination of operations, liquidated damages and dispute resolution. I hope you never need it, but once in the agreement, the consequences of an offence will be clearer and the likelihood of an offence lower. These documents were developed for use in a Series A funding series.



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