Vesting: you need to agree the period during which your share ownership takes effect. Your investors will also be keen to have this contractual position. Typically 2-4 year periods are the market norm.
Cliffs: it’s normal to have an initial period during which you don’t own the shares (the Cliff Period). If you leave before the Cliff finishes you get nothing. Often the Cliff Period is one year.
Acceleration & Exit: you need to define what happens if your company is sold during the Vesting period. Very often founders agree that Vesting is accelerated in these circumstances however sometimes there are conditions attached, like sale price.
|Factor||Questions to ask|
|Type of venture||Project or ongoing business? Regulated environment?|
|Tax||How are profits and reliefs on losses treated?|
|Contributions||What does each founder bring?|
|Finance||Who & how much? what terms & security?|
|Liability||Who has it? Can it be restricted?|
|Control||How are decisions made/vetoed?|
|Accounting impact||How do your other businesses look?|
|Exit strategies||Future intentions?|
We prepare dozens of co-founder agreements each year. We will do everything that’s legal to protect your position! To understand more about our team and recent transactions we have supported, contact us or tweet us @whoneedslaw