The Founder Shareholder Agreement serves as a critical legal foundation for new companies and startups in Australia. It should be implemented at or shortly after company formation, before any significant business operations commence or external investment is secured. This agreement is essential for documenting the founding shareholders' rights, responsibilities, and expectations, while establishing clear governance structures and decision-making processes. The document typically addresses key aspects such as share ownership, vesting schedules, business operations, intellectual property rights, and exit strategies, all within the framework of Australian corporate law and regulations. It's particularly important for protecting all founders' interests and preventing potential disputes by clearly defining each party's roles, commitments, and the procedures for handling various business scenarios.
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1. Parties: Identification of all founding shareholders and the company
2. Background: Context of the agreement, including company formation and business purpose
3. Definitions and Interpretation: Key terms used throughout the agreement and rules for interpretation
4. Share Capital Structure: Details of share classes, rights, and initial shareholding allocations
5. Shareholders' Commitments and Contributions: Initial investments, commitments, and responsibilities of each founder
6. Management and Decision Making: Governance structure, board composition, and decision-making processes
7. Reserved Matters: Decisions requiring special majority or unanimous consent
8. Shareholders' Rights and Obligations: Voting rights, dividend rights, and general obligations of shareholders
9. Share Transfer Restrictions: Limitations on transfer of shares and pre-emptive rights
10. Founder Vesting Provisions: Vesting schedule for founder shares and conditions
11. Non-Compete and Confidentiality: Restrictions on competitive activities and protection of company information
12. Intellectual Property Rights: Ownership and protection of company IP
13. Default and Consequences: Events of default and resulting actions
14. Exit Provisions: Procedures for company sale, IPO, or other exit events
15. Dispute Resolution: Process for resolving disagreements between parties
16. General Provisions: Standard boilerplate clauses including notices, amendments, and governing law
1. Tag-Along and Drag-Along Rights: Used when parties want to include provisions for forced sale or right to join in sale of shares
2. Employee Share Option Pool: Include when the company plans to implement an ESOP
3. Dead Lock Resolution: Specific procedures for resolving deadlock situations, recommended for 50/50 ownership structures
4. Put and Call Options: Include when parties want specific rights to force purchase/sale of shares
5. Foreign Investment Provisions: Required when any founders are foreign persons under FIRB regulations
6. Good Leaver/Bad Leaver Provisions: Detailed provisions for share treatment when founders leave the company
7. Future Funding Provisions: Include when anticipating future investment rounds
8. Founder Earn-Out Mechanisms: Used when founder shares are tied to performance metrics
9. Special Rights for Specific Share Classes: Include when creating different classes of shares with varying rights
1. Schedule 1 - Company Details: Corporate information, share capital structure, and current shareholdings
2. Schedule 2 - Initial Business Plan: Company's initial business strategy and objectives
3. Schedule 3 - Reserved Matters List: Detailed list of decisions requiring special approval
4. Schedule 4 - Deed of Adherence: Template for new shareholders to join the agreement
5. Schedule 5 - Share Vesting Schedule: Detailed vesting terms and timeline for founder shares
6. Schedule 6 - Founder Services Agreement: Terms of founders' service to the company
7. Schedule 7 - IP Assignment Deed: Documentation of IP transfer to the company
8. Schedule 8 - Tag and Drag Along Procedures: Detailed procedures for implementing tag and drag along rights
9. Appendix A - Valuation Methodology: Agreed methods for share valuation in various scenarios
10. Appendix B - Key Performance Indicators: Metrics for measuring founder performance if relevant to vesting or earn-outs
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