Founders Stock Agreement for the United Kingdom

Founders Stock Agreement Template for England and Wales

A Founders Stock Agreement under English and Welsh law is a legally binding document that establishes the terms and conditions governing the allocation, ownership, and transfer of shares among company founders. It outlines vesting schedules, transfer restrictions, voting rights, and exit provisions while ensuring compliance with UK company law and corporate governance requirements. This agreement serves as a crucial foundation document that helps prevent future disputes and provides clarity on shareholders' rights and obligations.

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What is a Founders Stock Agreement?

The Founders Stock Agreement is essential when establishing a new company or formalizing the relationship between existing founders under English and Welsh law. It should be implemented at the company's formation or before any significant corporate actions. This agreement typically includes detailed provisions on share vesting, transfer restrictions, drag-along and tag-along rights, and founder obligations. It's particularly crucial for startups seeking investment, as it demonstrates clear ownership structures and governance mechanisms to potential investors.

What sections should be included in a Founders Stock Agreement?

1. Parties: Identification of all founding shareholders and the company

2. Background: Context of the agreement and company formation details

3. Definitions: Key terms used throughout the agreement

4. Share Allocation: Details of initial share distribution among founders

5. Founders' Commitments: Obligations and responsibilities of founders

6. Transfer Restrictions: Limitations on share transfers and right of first refusal

7. Vesting Provisions: Terms of share vesting schedule and conditions

8. Termination: Circumstances and consequences of agreement termination

What sections are optional to include in a Founders Stock Agreement?

1. Drag-Along Rights: Rights forcing minority shareholders to join in sale when majority shareholders sell their shares

2. Tag-Along Rights: Rights allowing minorities to join in sale of majority stake to protect their interests

3. Anti-dilution Provisions: Protection mechanisms against share value dilution in future funding rounds

4. Intellectual Property Assignment: Provisions for assignment of existing intellectual property rights to the company

What schedules should be included in a Founders Stock Agreement?

1. Share Capital Table: Detailed breakdown of shareholdings and ownership structure

2. Vesting Schedule: Detailed timeline and conditions of share vesting arrangements

3. Company Details: Registration details and corporate information of the company

4. Deed of Adherence: Template document for new shareholders to join the agreement

5. Form of Share Transfer Notice: Standard form template for share transfer notifications

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Genie AI

Cost

Free to use
Relevant legal definitions
Industries

Companies Act 2006: Primary legislation governing company operations, including share capital rules, directors' duties, company constitution requirements, pre-emption rights, and share transfer provisions

Financial Services and Markets Act 2000: Legislation covering regulations regarding share offerings and financial promotion rules in the context of company shares

Income Tax Act 2007: Tax legislation covering implications for share ownership and Enterprise Investment Scheme (EIS) considerations

Corporate Governance Code: Guidelines and principles for company governance and best practices in corporate management

Financial Services and Markets Act 2000 (Financial Promotion) Order 2005: Specific regulations regarding the promotion of financial instruments, including company shares

Enterprise and Regulatory Reform Act 2013: Legislation affecting business regulation and enterprise development

Small Business, Enterprise and Employment Act 2015: Legislation specifically focused on small business operations and employment matters

Companies House Requirements: Regulatory requirements for company registration, filing, and ongoing compliance with the UK company registry

FCA Regulations: Financial Conduct Authority regulations governing financial services and markets where applicable

HMRC Requirements: Tax authority requirements regarding share schemes and related tax implications

Contract Law Principles: Common law principles governing contract formation, enforcement, and interpretation

Fiduciary Duties: Legal obligations of trust and duty of care applicable to company directors and officers

Equitable Principles: Principles of fairness and equity in corporate and commercial relationships

Shareholder Rights Case Law: Established legal precedents regarding shareholder rights, obligations, and disputes

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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