Key Legal Documents for Startups

1. Non – disclosure agreement

This is the document that the startup should first sign with any party who is interested to value or invest in its business. It protects the confidentiality of the information and documents disclosed by the startup company to the prospective investors and vice versa.

2. Subscription Agreement

The document that governs the process, price and number of the new shares to be subscribed by the investor.

3. Shareholders’ Agreement

This document that governs the relationship between the shareholders in a company. It is a binding contract between shareholders and where there is dispute between shareholders, the terms of this agreement will govern the manner in which the dispute is to be resolved. The dispute may include operational matters or shareholders’ matters. It is worth noting that it is a common practice that founders in a startup do not sign a shareholders’ agreement and this may give rise to issues later. Professional investors will however make this mandatory to be signed between all founders and the investors.

4. An Employment Agreement

From the investor’s point of view, it is crucial that the founders and key personnel sign a binding employment contract with the company. In the employment agreement, matters such as exclusivity of employment and the business that the founders are in, as well as transfer of intellectual property rights from the founders to the company, are duly addressed.

5. An intellectual property assignment agreement

The founder or the developer (of the software / website) assigns the intellectual property rights in the software / website to the company.

6. A put-option agreement

This gives the shareholder the right to sell its shares at a specified price within a specified period.

7. A call-option agreement

This gives the shareholder the right, to buy the shares at a specified price within a specific time period.

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