Founder Agreement Package

Possibly the most important first step in a business is formalising the relationship between the business founders. This relationship really needs to focus on the following principles – and we have solutions that address each one of them for you.

  • Commitment: the success of the business you have embarked on will take commitment from each of the founders. How can each of you be sure that all the founders are committed?
  • Control: how are the big decisions taken by the company? Who really has the power to make these decisions? Who really controls the company?
  • Economics: who owns the company, and in what proportions? Then, how can the founders get the value created by the business – how are the profits of the company distributed to the founders, and when can the founders sell their shares?
  • Funding: how will the company initially be funded – loans from founders? Working for no or a low salary? Angel funding?

HOW DO WE HELP YOU SOLVE THESE ISSUES? ∨

We have developed a single document which regulates both the operation of the company and the relationship between the shareholders / founders – the founder Memorandum of Incorporation (we call this the “Founder Agreement“).

This document is based on a Memorandum of Incorporation (“MOI“) which our firm has developed over the years, and which we believe is of premium quality. To that, we have added solutions that address each of the founder relationship principles mentioned above, namely, commitment, control, economics and funding.

HOW DO WE DO THAT? ∨

We will work with you to help you to understand:

  • each of the principles relating to the founders’ relationship (commitment, control, economics and funding) and the fundamental points of operating a company (which every company’s MOI must deal with);
  • the framework document we will provide you with as a starting point – this allows you to get a quick, high-level understanding of the issues and the solutions; and
  • our proposed solutions to each of these principles relating to the founders’ relationship:
    • commitment: we will make sure that the founders have to stay operationally involved in order to keep their shares;
    • control: we allow for directors to be appointed, with defined voting rights, and explain shareholder rights to intervene in the decisions of the company;
    • economics: we work through the principles of an exit, how that can happen, and how profits can be distributed; and
    • funding: we address how loans are made to the company, how interest is managed, and how those loans are repaid.

This will be done through personal discussions with you, and also by providing you with the resources to work through these principles.

PRACTICALLY, WHAT NEXT? ∨

Start the process by clicking the button below, and:

  • we will send you a welcome pack to consider and work through with your founder team;
  • once you’ve had an opportunity to consider the discussion points set out in the welcome pack, we will consult with you (in person / over Skype / by phone) to get to know you and your business, and to work through each of the factors we’ve described. As part of our commitment to our goal of removing all obstacles to engaging with clients, this meeting / Skype / phone call will be free of charge. The more prepared you are for the consultation, the more value you’ll get out of it – we will answer any questions that you may have regarding your Founder Agreement during the consultation;
  • out of that, if you choose to engage with us, we will prepare a framework document setting out a high-level overview of your Founder Agreement;
  • once the framework document accurately reflects your intentions, we will prepare your Founder Agreement; and
  • we will also help with practical resources to assist you in dealing with your company administration yourself (with regard to setting up shareholding, directors and any administrative filings required by law).

COST? ∨

One of our primary goals as a firm is to remove all obstacles to engaging with our clients. Our continued commitment to this goal is demonstrated by our offer of an initial consultation free of charge. If you choose to engage with us after our consultation, our fee will be R6 000 plus VAT: covering the framework document, the creation of your unique Founder Agreement and our guidance resources.

AND THEN? ∨

We help you through every step in growing your business. Feel free to contact us to: create an agreement with your customers, employee incentive arrangements, an agreement regulating the funding of your company, and to discuss getting value out of your business.

Start the process

REMEMBER ∨
We have proposed that the arrangement between founders be put in place in the MOI. That allows us to create one high-quality document that covers the essentials fast, at a lower cost, and in personal consultation with you.

This is a streamlined solution to the conventional legal system in which you have a separate MOI (dealing with the operational and governance issues) and shareholders’ agreement (dealing with the issues we’ve described as: commitment, control, economics and funding). The conventional legal system of an MOI and a shareholders’ agreement is a longer and more expensive process, but is usually better for these primary reasons:

  • the MOI is not an agreement, rather it is adopted by the shareholders. Only 75% of the shareholders are required to adopt it, or to make changes to it. On the other hand, a shareholders’ agreement requires 100% of the shareholders to agree, or to make any changes to the agreement;

  • you have flexibility to address a great deal of other issues that may be specific to your relationship as shareholders in a shareholders’ agreement; and

  • the MOI is a public document, in that anyone can petition the Companies and Intellectual Property Commission (CIPC) for a copy.

On the other hand, we feel that the Founder Agreement is a prudent, cost-effective solution for early stage companies, precisely because it deals with the fundamentals of the situation well, in a way that streamlines the legal work required and therefore makes it more accessible to early-stage businesses who are cash sensitive.

However, you do need to know that your Founder Agreement may need to be substituted for the conventional arrangement (a separate MOI and shareholders’ agreement) at some point – most likely, if you bring an investor on board, or if you want to deal with other issues in the Founder Agreement beyond those which we have described in the framework document. We will have specific package offerings explaining that on our website, which can show you the comparative costs and benefits.