Founders agreement in Ahmedabad

Documents required for Founder’s agreementin Ahmedabad:

The following legal documents are required for the Founder’s agreement in Ahmedabad:

1)      Articles of Incorporation.

2)      Intellectual Property (IP) Assignment Agreement.

3)      By Laws

4)      Operating Agreement (Founder’s Agreement)

5)      Non Disclosure Agreements.

6)      Employee Contracts and Offer Letters.

7)      Shareholder Agreements.

Advantages of Founder’s Agreement in Ahmedabad:

Some of the advantages of the Founder’s agreement in Ahmedabad are as follows:

1.         It can impact how the company is run

How a company is run is usually left to the Board of Directors. Often founders are directors also, but what if you wish to recruit directors who are not shareholders or you want to step away from the daily management at a later stage. It is advisable that the shareholders ensure certain issues should require shareholder approval, such as loan agreements, bringing in investment or selling assets.

2.         Shareholders may not agree

Disagreements occur in all businesses and it is sensible to agree to the provisions that should apply to how a business or commercial decision is to be made and who has the authority to agree on this. It is much harder to do this once the disagreement has already occurred. Provisions should include what decisions need a majority or in turn a unanimous agreement and what can be determined by the board of directors only. Laying out the areas of responsibility and how decisions can be reached avoids issues leading to disputes. Those that have only 2 shareholders 50:50 need this clearly mapped. Otherwise, if you cannot agree then it could result in a deadlock and the company being wound up, losing your valuable IP along the way. So decide now who has a casting vote as well as when and how it will be used.

3.         It can address how to resolve disputes

Many of the disputes which typically arise between shareholders are avoided or resolved quickly if there are documents in place which deal with the issue. If disputes do occur, there can be specific clauses that may include at what stage there would be a referral to mediation or arbitration, all of which seek to avoid court action. It can set out how shares should be valued if this is a disputed topic and it can allow you to agree to third parties who are permitted by you all to determine a dispute on your behalf

4.         It can protect the minority shareholders

A shareholders’ agreement can provide protection for minority shareholders by only allowing certain decisions to be made by the unanimous consent of all the shareholders. For example, the agreement can limit the ability of the company to issue further shares unless all the shareholders agree. This protects the minority shareholder where the majority may only attempt to sell their own shares instead of finding a buyer for all the shareholders. This is something in-coming investors will certainly welcome and will look attractive to them if they are giving you seed or scaling up funding.

5.         It can protect majority shareholders

Majority shareholders can benefit from a “Drag along” provision. This would come into play where an offer is received to buy all of the shares in a company and the majority shareholders wish to accept that offer. The rights allow the majority to force the hand of the minority shareholders on the same terms to avoid losing the deal. This is key for those that develop IP, launch and wish to sell on the product once it has been tested in the market.

6.         Attractive to Investors

Having a Shareholders’ Agreement increases the attractiveness of the company particularly for investors. It can demonstrate a professional business that has taken legal advice and planned for certain eventualities. Investors are reassured that disputes can be dealt with swiftly and that all parties have transparently laid out their obligations to the company

FAQs 

1. I am in the early stages of starting my business. What basic legal issues do I need to be aware of at this time, and where should I start?

Starting a new business is an exciting and challenging undertaking. Begin by reviewing existing agreements you may have with your employer, as they may contain IP assignment provisions or restrictive covenants that could limit or harm your new venture. Next, consider how you should protect your business idea: use NDAs, IP contribution agreements, and consider the applicability of patents, copyrights, and trademarks. Next, decide how your company will be structured. When evaluating which form of entity is right for you, identify tax considerations and the location and jurisdiction of your business. Finally, draft governing documents such as your articles of incorporation, bylaws, shareholder agreements and operating and partnership agreements. Consulting with financial, accounting/tax and legal professionals earlier in the process will help you avoid future problems and anticipate key steps as your business grows.

2. My startup is beginning to expand, and I may need to raise capital to keep up. What do I need to consider as I evaluate funding options?

Your projected funding needs will be key. If you don’t need a lot of money you may prefer debt to equity, as it will allow you to expand without diluting your ownership or control. However, early-stage investors may not be willing to lend your business money unless there is the potential for upside; convertible debt can be a solution. The real risk of selling equity at an early stage is that you give away too much of your business for too little. You need to have a realistic sense of the attractiveness of your business to potential investors. Also, securities offerings done right aren’t cheap. Working with advisors, including industry experts, financial, tax/accounting and legal professionals before you begin to raise capital is a smart way to better position your business.

3. I have a fast-growing private company in Washington, and am worried about keeping up and managing my company’s growth. How can I best prepare for rapid expansion?

Look for ways to nurture your growth by developing relationships or strategic partnerships with other businesses or individuals who can further your goals. This may include targeting certain businesses for merger or acquisition opportunities. Plan out your expected financing needs by considering whether credit or equity rounds the best suit your objectives. Be prepared to devote more time to managing your workforce. In addition to polishing your employment policies and processes, you’ll need to pay more attention to compensation and benefits, immigration compliance and whether you’ll need additional office space. Proactively seek the advice of your accountants, lawyers and financial advisors as you take your business to this exciting next stage of expansion.

4. I’ve been thinking about selling my business. What should I be doing now to prepare my business for sale?

You should start by creating an exit plan that includes your personal goals (i.e., estate planning), as well as goals for the future of your business. This will help you hone your preparation and decision making during the sales process. Purchasers will want to review your financial, business, legal and other records, so it will greatly improve the efficiency of the process to make sure you are organized in advance. You should engage with your professional advisors (tax, financial, legal, etc.) before you start looking for purchasers to ensure your accounting, tax and a legal house is in order. Additionally, if your advisors discover that any cleanup is necessary, you’ll be able to handle it before it can adversely affect your business’s sales prospects.

5. I’ve decided to sell my business, and started my preparations to sell. What does the sales process look like?

You should already have an exit plan. As part of that plan your tax, accounting, and legal advisors should be assisting you as needed. For example, your plan may involve engaging brokers or investment bankers to help you find a buyer. Your lawyers should help you revise and negotiate any broker or banker contract. Your business records should be in order, and you should be careful to keep them that way. If you’ve engaged a broker or banker, he/she will help you navigate the actual sales process, but your accountants and lawyers should be engaged to review and revise letters of intent, draft and revise deal documents, and assist with due diligence.