The Founders Stock Agreement is a crucial document used when establishing a new corporation or formalizing the relationship between existing founders in Canada. It becomes necessary when two or more individuals join forces to start a business and need to clearly define their equity ownership, responsibilities, and rights. This agreement typically comes into play during or shortly after incorporation, when initial shares are being issued and the foundation of the company's governance is being established. The document incorporates specific Canadian legal requirements, including compliance with the Canada Business Corporations Act or provincial equivalents, securities regulations, and tax considerations for Canadian Controlled Private Corporations (CCPCs). A properly structured Founders Stock Agreement helps prevent future disputes by clearly documenting vesting schedules, transfer restrictions, and exit provisions, while also protecting the company's intellectual property and confidential information.
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1. Parties: Identification of the founding shareholders and the corporation
2. Background: Context of the agreement, including incorporation details and purpose
3. Definitions and Interpretation: Key terms used throughout the agreement and rules of interpretation
4. Share Subscription and Issuance: Details of initial share allocation and payment terms
5. Representations and Warranties: Statements of fact by founders regarding their capacity and authority
6. Vesting Provisions: Schedule and terms for share vesting, including acceleration events
7. Transfer Restrictions: Limitations on share transfers and required procedures
8. Right of First Refusal: Process for existing shareholders to purchase shares before external sale
9. Drag-Along Rights: Majority shareholders' right to force minority participation in sale
10. Tag-Along Rights: Minority shareholders' right to join in sale by majority
11. Founder Commitments: Time commitment, roles, and responsibilities of founders
12. Confidentiality: Protection of company and founder confidential information
13. Intellectual Property Assignment: Assignment of founders' IP rights to the company
14. Dispute Resolution: Process for resolving disputes between founders
15. General Provisions: Standard boilerplate clauses including notices, amendments, and governing law
1. Death and Disability: Procedures for handling shares upon death or disability of a founder
2. Non-Competition: Restrictions on founders competing with the company, if applicable
3. Board Representation: Rights of founders to appoint board members
4. Information Rights: Founders' rights to company financial and operational information
5. Pre-emptive Rights: Rights of founders to maintain ownership percentage in future offerings
6. Family Law Provisions: Protection of company interests in case of founder divorce or family disputes
7. Good Leaver/Bad Leaver: Different treatment of shares based on circumstances of founder departure
8. Special Corporate Opportunities: Process for handling business opportunities related to company's business
1. Schedule A - Share Capital Table: Detailed breakdown of share ownership and classes
2. Schedule B - Vesting Schedule: Detailed timeline and terms of share vesting
3. Schedule C - Form of Share Transfer Notice: Standard form for notifying intent to transfer shares
4. Schedule D - Deed of Adherence: Form for new shareholders to become bound by the agreement
5. Schedule E - Founder Details: Personal information and contact details of founders
6. Schedule F - Initial Business Plan: Overview of company's initial business strategy and objectives
7. Schedule G - Restricted Activities: List of actions requiring special approval
8. Schedule H - Share Transfer Valuation Methodology: Agreed method for determining share value in transfers
Relevant legal definitions
Agreement
Applicable Law
Articles
Bad Leaver
Board
Business
Business Day
By-laws
Call Option
Change of Control
Common Shares
Company
Competitor
Confidential Information
Deed of Adherence
Director
Disability
Dispute
Drag-Along Notice
Drag-Along Right
Effective Date
Encumbrance
Fair Market Value
Family Members
Financial Year
Founder
Founding Shares
Good Leaver
Intellectual Property Rights
IPO
Lien
Material Change
New Securities
Notice
Offer Notice
Original Founder
Parties
Permitted Transfer
Person
Pre-emptive Right
Purchase Price
Qualified IPO
Related Party
Restricted Business
ROFR Notice
ROFR Period
Securities
Share Capital
Shareholder
Spousal Consent
Tag-Along Notice
Tag-Along Right
Territory
Transfer
Transferred Shares
Triggering Event
Valuation
Vested Shares
Vesting Date
Vesting Period
Vesting Schedule
Applicable Law
Articles
Bad Leaver
Board
Business
Business Day
By-laws
Call Option
Change of Control
Common Shares
Company
Competitor
Confidential Information
Deed of Adherence
Director
Disability
Dispute
Drag-Along Notice
Drag-Along Right
Effective Date
Encumbrance
Fair Market Value
Family Members
Financial Year
Founder
Founding Shares
Good Leaver
Intellectual Property Rights
IPO
Lien
Material Change
New Securities
Notice
Offer Notice
Original Founder
Parties
Permitted Transfer
Person
Pre-emptive Right
Purchase Price
Qualified IPO
Related Party
Restricted Business
ROFR Notice
ROFR Period
Securities
Share Capital
Shareholder
Spousal Consent
Tag-Along Notice
Tag-Along Right
Territory
Transfer
Transferred Shares
Triggering Event
Valuation
Vested Shares
Vesting Date
Vesting Period
Vesting Schedule
Clauses
Interpretation
Share Issuance
Share Vesting
Share Transfer Restrictions
Right of First Refusal
Tag-Along Rights
Drag-Along Rights
Pre-emptive Rights
Board Representation
Voting Rights
Management Rights
Information Rights
Founder Commitments
Non-Competition
Non-Solicitation
Confidentiality
Intellectual Property Assignment
Death and Disability
Good Leaver/Bad Leaver
Spousal Consent
Share Valuation
Put and Call Options
Dispute Resolution
Termination
Amendment
Assignment
Notices
Governing Law
Severability
Entire Agreement
Share Issuance
Share Vesting
Share Transfer Restrictions
Right of First Refusal
Tag-Along Rights
Drag-Along Rights
Pre-emptive Rights
Board Representation
Voting Rights
Management Rights
Information Rights
Founder Commitments
Non-Competition
Non-Solicitation
Confidentiality
Intellectual Property Assignment
Death and Disability
Good Leaver/Bad Leaver
Spousal Consent
Share Valuation
Put and Call Options
Dispute Resolution
Termination
Amendment
Assignment
Notices
Governing Law
Severability
Entire Agreement
Relevant Industries
Technology
Software Development
Professional Services
Manufacturing
Retail
E-commerce
Healthcare
Biotechnology
Financial Services
Clean Technology
Media and Entertainment
Education
Consumer Goods
Agriculture
Real Estate
Consulting
Relevant Teams
Legal
Executive Leadership
Corporate Governance
Human Resources
Finance
Compliance
Corporate Development
Board of Directors
Administrative
Relevant Roles
CEO
Co-founder
Corporate Lawyer
Chief Legal Officer
Board Member
Corporate Secretary
CFO
General Counsel
Legal Counsel
VP of Legal
Chief Operating Officer
HR Director
Chief Technology Officer
Managing Director
Compliance Officer
Company Secretary
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