What do you absolutely need to have covered at the start?
1. Manage your cap table and have a mechanism to deal with leaver shares
Have your cap table on a simple spreadsheet and put simple Shareholder/ Founder Agreement and bespoke Articles of Association in place asap. Don’t use anything fancy at this stage!
The agreements / articles work like a prenup. Hopefully you’ll never need to rely on them. But things happen, founders sometimes can’t stay the distance, and founder fall out is sadly common. So, the docs should set out founder roles, equity splits, decision-making power, a conflict resolution process, and, most importantly, what happens to a leaver’s shares.
Having these docs in place helps resolve any disputes and stops early leavers from keeping a large stake, which is a big turn off for potential investors. If you don’t have them, it can take so much time and money to sort out that it can damage a startup beyond repair. We have seen this happen….
2. Intellectual property ownership and protection
Ensure IP is transferred to the company, trade secrets and confidential information are protected, and trade marks, patents, etc are registered in the company’s name.
If this isn’t done early on it can be hard/ impossible to fix later. And if the company’s value is based on its IP, (brand, proprietary software, etc), but you can’t show it is owned by the company and protected, it’ll put-off investors/ customers/ etc. So:
- Get simple IP assignments from founders, freelancers, agencies, etc. for any IP created by them (e.g. software, brand) etc. and use simple agreements like OneNDA.
- Register your brand and any unique product names as trade marks in the countries in which you’ll be trading (with the correct spec and in the right classes) to prevent others from using anything similar.
- If you’re developing novel products/ technology, consult a patent specialist early to determine if you can get patent protection. It’s too late once you’ve launched…
Almost everything else can be put in place as you scale.
If you want to discuss how we can help ensure you get these basics right get in touch on info@legaledge.co.uk. We also offer a Cap Table and Corporate Document Review as well as a free Trade Mark Audit so if you’re not sure if your brand is protected or think your current documents aren’t fit for purpose we can help.
