It’s not uncommon leaving the start-up or business by founder or co-founder due different reasons. Departing of the founder or co-founder may adversary impact the organisation unless required steps are taken while forming business.
Ways to Ease Co -Founder Exit Smooth: Planning early and adopting few precautionary measures are helpful to ease the process of founder exit smooth and also helps in reducing the adverse impact on the business.
The below are the some of the common measures to plan and follow for smooth exit
- Execution of Founders Agreement: This agreement serves several purposes and one among them is detailing the roles and responsibilities of founder while existing the organisation and as well as after exiting the organisation.
- Vesting Period: Adding the Vesting Provision to the Founders Agreement or shareholder Agreement will be great help if any founder or co-founder decides to depart by reducing the risk of disagreements with regard to ownership.
- Right of First Refusal: In order to effectively deal with leaving of co-founder equity in the organisation provisions like right of first refusal are useful.
- Founders IP Agreement: It’s good to have a Founder IP Agreement by business which details the IP ownership and assignment terms during the exist by any co-founder. Plus confidently provisions to protect trade secrets.
- Effects of Termination Provisions: Incorporation of clearly defined and foreseen provisions as to the effects of the termination of co-founder agreement. Tailor made contractual terms in this regard while of immense importance to avoid the disputes during exist.
- Survival Rights after Termination: Specifying which provisions will survive after the termination of founders’ agreement is crucial as these terms will only protect the business against unwanted competition but also shield IP rights.
- Non-Compete Agreement: Well defined Agreement is regard protect the company and helps to avoid slippage of its investment and time by leaving member.
- Non -Solicit Agreement: To keep the customers, vendors and employees relationships ongoing and not be pulled by the leaving member or co-founder.
Key Takeaways: Better to take legal professionals help to address and strategize on the exit aspects in line with the available legal options and also avoid disputes cropping up at the early formation of business. Don’t wait for the disagreements and fights among the members to seek legal help.
If there are more than one founder of business then choose form appropriate of business entity otherwise will be partnership. If don’t execute the Founders Agreement then it may lead to disagreement between the co-founders.
Detailed exit provisions in the Shareholding Agreement or co-founder Agreement plays crucial role in the smooth functioning of business when the business as more than one founder.
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