Co-Founder Agreement Contributor, Sebina Noreen Malik

Claire Lines • 22 July 2022
A new business venture may be exciting for an entrepreneur, for partnerships, LLPs, companies, or societies but if you’re working with other partners, it is essential that you establish and enter a written legal contract as a start-up founder to protect yourself.

A co-founder agreement will govern your business relationships and determine your duties, liabilities, obligations and responsibilities. An existing company or business cannot enter into a co-founder agreement unless it uses the document for minor modifications but an existing business can enter a non-disclosure agreement retrospectively.

What is a Co-Founder Agreement?

A co-founder agreement is an official contract, or a legally binding agreement containing each co-founders’ interest that is executed between co-founders before incorporating a company and sets out the essential protection clauses, strategies, the company’s ownership (not every co-owner is 50/50 owner), responsibilities and duties of every co-founder, the initial capital contribution/investment proportion of each co-founder, which usually varies and Intellectual Property ownership. It can also protect you in case of a dispute arising in the future regarding the business between co-founders.

The co-founder agreement (which is similar in a sense to a pre-nuptial agreement) can cover everything from the following but not limited to:
- How key decisions of the business will be made?
- What salaries, if any, are the co-founders entitled to? How can that be modified?
- What happens when someone exits the business? Is there a pre-emption clause in the co-founder agreement? Are the other co-founder entitled to buy back the exiting co-founder’s shares? 
- Clear objectives of the company? What the company proposes to do and how? 
- The number of equity shares of each co-founder entering the legally binding document?
- The overall percentage of shares provided to each co-founder?
- Can the co-founders launch other start-ups whilst working on this project?
- Acknowledging and accepting all the terms and conditions before the co-founder agreement is duly signed by all the co-founders.

Parties can also add agreed terms and clauses to the co-founder agreement as an addendum to protect their rights and address their liabilities.

Dispute Resolution

It may be sensible to get a dispute resolution clause in the co-founder agreement at the outset, that is triggered before you go to court and that is in your favour in the event a dispute or conflict arises in the future.

What are the objectives of the Co-Founder Agreement?

The co-founder agreement is essential for newly incorporated company. Think of it as an agreement among the co-founders serving as an insurance to prevent disputes among them.

Questions you may consider before entering a Co-Founders Agreement

There is no formal way to create a co-founder agreement, but you might have some questions in mind before creating and entering one with regards to the details that should be in the co-founder agreement, such as:
- Purpose of the business? Is this a new area?
- Goals of all the parties to the start-up.
- Respective timelines for achieving those goals.
- indicate the name of the company and all founders involved, the ownership structure, a description of your business plan, initial capital, additional contributions, budget, expenses, roles and responsibilities, and taxes. 
- Consider including the management, legal decision-making, approval and operating rights, salary and compensation, equity and vesting, removal or departure of founders, dispute resolution, dissolution and termination clauses, and intellectual property assignment.

Do you share the same values as your Co-Founders?

It is important that you have long-term compatibility with your co-founders. Consider their outlook on life, tolerance for risk, personal aspirations, and whether or not your values align. You must also explore the personal and professional motivations of all co-founders and get everything evidenced in writing before the co-founders come together.

AJames Solicitors comprise a team of experienced Solicitors. If you need to enter a co-founder agreement, or if a potential dispute has arisen as a result of an existing co-founder agreement, contact our solicitors by visiting AJames Solicitors website for more information, or contact them on: 0161 791 6666/07729461166 for any legal queries, or send a message with your enquiry using the link below and a member of the team will contact you: https://www.ajamessolicitors.com/contact

Disclaimer
This disclaimer asserts that the information published in this article, the content of the information discussed or comments provided do not constitute legal advice, or other professional advice or services. The information contained in this article is for general information purposes only. No warranties or representations whether express or implied are given, about the completeness, accuracy, reliability, suitability or availability of the information contained in this article for any purpose and excludes any liabilities that may arise out of, or in connection with the use or misuse of the information. Any reliance you place on such information is therefore strictly at your own risk. No lawyer-client relationship exists and you are required to seek your own independent legal advice.


by Claire Lines 22 July 2022
The Civil Procedure Rules (“CPR”) for the County Court and High Court are procedural rules governing civil litigation to make civil disputes less adversarial
21 July 2022
Litigation is the process of taking legal action by a business, or individual against one or multiple parties to resolve a dispute.
by Contributor Sebina Noreen Malik 10 June 2022
What is Negotiation? Negotiation is a form of Alternative Dispute Resolution (ADR). It is when two or more people attempt to reach an agreement and it’s what we do on a daily basis whether we realise it or not. We negotiate in our personal and professional lives, with family members or colleagues, when we meet new people or third parties and in our social lives without thinking about it. Negotiation skills matter because they can change our lives and the more you think of a situation as a 'negotiation', the better you will become at understanding the other side, knowing what they want to achieve and be able to manage yourself better in various situations that you find yourself in. Pre-planning your techniques and strategies can put you in a better position so that you are more mindful and know how to achieve what you want from the deal. Role play can be a very strong way to practice what you want with confidence. You may wish to practice ‘negotiating with yourself’ first so that you are pre-prepared should any surprising or unexpected situations arise, for example: • Why does the opponent want to settle? • What is the value in it for them? • What solution do they want to achieve? • Will they walk away if their desired outcome is not reached or continue to negotiate? When you first walk into a negotiation room or situation, be curious and remain alert as though you are walking into a new city. It is important that you listen, seek to understand, observe their body language, their tone of voice and when necessary use empathy with the other side to open up dialogue. These skills will help you to determine what the other side wants and what their fears are if the deal is not made, enabling you to consider how that need can be addressed and in turn ensuring the outcome is a positive outcome for all parties involved in the dispute. Remember, the end goal for every person involved in the negotiation should be to remain flexible and accept the end result; in my experience, flexibility creates freedom. The main focus should be to get an agreement or deal in place so that the parties walk away with a 'win, win' situation and if all the parties to the dispute work towards this goal together, a sensible outcome may be achieved and in certain circumstances, long term relationships can be maintained. Concluding thoughts You should always remain confident and in a position of strength, know your baseline and reserve the right to walk away from the deal if the negotiation is one sided, for example, if the other side is attempting to capitalise on your every move, or if you feel despite your best efforts, no progress can be made. At times, negotiations may fail due to issues such as: • Lack of understanding • Not building relationships or rapport • You let your ego get in the way • You begin to feel competitive • You become too attached to the outcome • You fail to listen and fail to ask good questions for a deeper understanding of the motives • You fail to research and understand the behaviours and previous strategies of the person(s) you are negotiating against In situations such as the above, when you begin to feel overwhelmed, slow down and if you are having a face to face discussion, perhaps reconvene after the parties’ emotions have calmed down. You may wish to meet at a neutral venue to ensure all the parties feel as relaxed as one another to move the parties to the end goal. Finally: • Stay realistic during a negotiation • Stay focused • Be careful about ‘showing your hand’ too soon, and • Remember, everything in life is a negotiation AJames Solicitors comprise a team of experienced solicitors. Visit AJames Solicitors website for more information, or contact them on: 0161 791 6666/07729461166 for any legal queries, or send a message with your enquiry using the link below and a member of the team will contact you: https://www.ajamessolicitors.com/contact Disclaimer This disclaimer asserts that the information published in this article, the content of the information discussed or comments provided do not constitute legal advice, or other professional advice or services. The information contained in this article is for general information purposes only. No warranties or representations whether express or implied are given, about the completeness, accuracy, reliability, suitability or availability of the information contained in this article for any purpose and excludes any liabilities that may arise out of, or in connection with the use or misuse of the information. Any reliance you place on such information is therefore strictly at your own risk. No lawyer-client relationship exists and you are required to seek your own independent legal advice.
by Contributor: Sebina Noreen Malik 9 June 2022
Third Party Litigation Funding, also known as Litigation Finance is a popular way to finance large litigation claims, especially when businesses may be experiencing cash flow problems. A third party that has no prior connection to the case will agree to finance some, or all of the legal costs of litigation in return for a fee payable from the proceeds recovered by the litigant. Many claimant-side law firms in the UK understand how Litigation Funding works and in the past few years, especially since the pandemic, funding activities have increased globally because many companies around the world face liquidity risks and are finding it difficult to meet the costs of commencing, or continuing existing proceedings and therefore, seek third party funding arrangements to protect their position. As the funding market develops, the range of Litigation Funding sources and products are becoming available, including but not limited to, law firms that fund cases directly, family businesses, portfolio funding or hedge funds. Litigation Funders will carry out detailed due diligence at the outset and require good prospects of successfully reaching a settlement in the client’s favour. They also want to be certain that the defendant is able to meet the monies claimed, the costs and any interest due upon settlement of the case. When choosing a Litigation Funder, factors such as those listed below (but not limited to) should be considered when making an informed choice: • The level of risk that a Litigation Funder is willing to take? • Is the Litigation Funder easy to work with, adaptable and willing to compromise? • Years of experience and knowledge in the area? • Percentage costs the Litigation Funder requires at the end of the case (usually 30% to 50% of recoveries)? • The Litigation Funders availability to provide capital long term over a number of years/reserved capital and solvency of the Litigation Funder? • The speed of decision-making as well as approving the funding without delay? • The risk allocation between legal representatives, claimant and Litigation Funder? • The Litigation Funders level of control over the settlement or litigation? • Does the Litigation Funder require exclusivity while conducting due diligence? • Does the Litigation Funding Agreement protect the client’s positon? The Importance of Litigation Funding • The legal costs will be funded by a third party and may not impact the balance sheet of the business. This way investors will not be deterred. • Many business disputes can last several years and it is therefore crucial to develop a long-term relationship between the claimant, Litigation Funder and lawyers. • Securing Litigation Funding can ensure a claimant can pursue a genuine and meritorious claim against the opponent, particularly if the opponent is a large entity with unlimited resources. The Risks with Litigation Funding • Loss of some control of the case because the Litigation Funder may want an input in the decision making process. • The settlement may not be entirely what the claimant wants. • You will have to make the opponent aware of the funding arrangement. AJames Solicitors comprise a team of experienced solicitors. Visit AJames Solicitors website for more information, or contact them on: 0161 791 6666/07729461166 for any legal queries, or send a message with your enquiry using the link below and a member of the team will contact you: https://www.ajamessolicitors.com/contact Disclaimer This disclaimer asserts that the information published in this article, the content of the information discussed or comments provided do not constitute legal advice, or other professional advice or services. The information contained in this article is for general information purposes only. No warranties or representations whether express or implied are given, about the completeness, accuracy, reliability, suitability or availability of the information contained in this article for any purpose and excludes any liabilities that may arise out of, or in connection with the use or misuse of the information. Any reliance you place on such information is therefore strictly at your own risk. No lawyer-client relationship exists and you are required to seek your own independent legal advice.
by Contributor Sebina Noreen Malik 9 June 2022
Formation of contract A contract is a written or oral agreement between two or more parties that is intended to be legally binding and enforceable by law. To form a valid contract that is enforceable, the following requirements are necessary: • A valid offer is made by one party to another • Valid acceptance of the offer in order for it to become a contract • Consideration, that is the price given in exchange for goods/services. Consideration must have value and the price is usually payment made by one party to another in return for entering the transaction. • The intention to create legal relations means that all parties intend to enter into a legally binding agreement where the obligations and rights of the agreement are enforceable. • Certainty of terms i.e. the contractual terms between the parties are certain and complete. Contract interpretation It is crucial the contract clearly and accurately reflects the intentions of the parties before signing. Understanding contractual interpretation and the importance of particular clauses can help ensure that the contract reflect the agreed intentions should a dispute should arise, for example: • Understand the factual background and have a contingency plan to cover risks associated with the contractual terms. • Words are given their ordinary meaning in law, unless a specific meaning by the statute is required. • When words are ambiguous and do not correspond a single meaning, a common sense approach will be applied. • Prior communications and draft versions of the contract will not be considered as evidence because they will be very different to the finally agreed contractual terms. • Does the contract contain any priority clauses setting out the order of importance? Force Majeure Clause A force majeure clause that has been expressly agreed between the parties can free them from performing their obligations under a contractual agreement without penalties, either permanently or temporarily, in whole or in part, should an unforeseeable event occur that is outside the parties’ control and make performance impossible such as, war, epidemic, earthquake, floods, fire or other natural disasters. Force majeure clauses can provide protection and may be included in contracts such as, wedding contracts, event contracts, insurance policies, service agreements and others. Dependent upon the drafting of the force majeure clauses, they may vary from contract to contract (or contract to sub-contract), or from jurisdiction to jurisdiction leading to a conflict or misinterpretation in certain circumstances. If there is no force majeure clause, then the limited common law doctrine of frustration may discharge the contract and the parties’ rights under the contract may be cancelled. Penalties for breach of contract A breach of contract occurs when a party fails to perform its obligations or promise under a contractual agreement for which the non-breaching party may take legal action in the court of law. The court will determine whether the breach was minor or substantial and determine any remedy, such as any damages for compensation, together with any interest for the delay, or an equitable remedy when legal remedies are insufficient, including rescission, reformation, or specific performance. If a contract includes a penalty clause expressly placing an obligation on the party who has breached the contract to provide compensation, this may be enforceable if the following are satisfied: • there is a legitimate purpose • the legitimate purpose is proportionate • the clause is not the main obligation but incidental to the main obligation when the main obligation cannot be satisfied. AJames Solicitors comprise a team of experienced solicitors. Visit AJames Solicitors website for more information, or contact them on: 0161 791 6666/07729461166 for any legal queries, or send a message with your enquiry using the link below and a member of the team will contact you: https://www.ajamessolicitors.com/contact Disclaimer This disclaimer asserts that the information published in this article, the content of the information discussed or comments provided do not constitute legal advice, or other professional advice or services. The information contained in this article is for general information purposes only. No warranties or representations whether express or implied are given, about the completeness, accuracy, reliability, suitability or availability of the information contained in this article for any purpose and excludes any liabilities that may arise out of, or in connection with the use or misuse of the information. Any reliance you place on such information is therefore strictly at your own risk. No lawyer-client relationship exists and you are required to seek your own independent legal advice.
by Contributor Sebina Noreen Malik 8 June 2022
Embracing technology Before the digital era, lawyers carried out tasks such as legal research and letter writing manually. Then came the introduction of Web 1.0 which was developed predominantly for companies who hired IT experts to produce read-only versions of documents for others to gain information and there was no individual interaction. This was followed by the Web 2.0 digital era, which was more user friendly and much more affordable. Individuals could read and write connect, share content using the internet and by emails, texts, social media and electronic search tools were introduced to make the client experience faster and smoother. We are now preparing to enter the Web 3.0 digital era, which will have smarter applications using Blockchain Technology and the Metaverse. The Web 0.3 experience is likely to be based on the analysis of individual behaviors and the focus will most likely be on user-generated information.
by Contributor Sebina Noreen Malik 8 June 2022
If you have been a victim of Professional Negligence you may be looking for a suitable solicitor to act on your behalf. I have put together some tips for selecting the best Professional Negligence Solicitor below: • Referrals – Referrals from friends or family are one way of being relatively certain that the recommended Professional Negligence Solicitor is more than likely to be trustworthy and reliable. • Online Reviews – You can browse online for the best Professional Negligence Solicitors. You don’t always have to choose a solicitor firm that is closest to you in location. Remote working means that you can choose a solicitor anywhere in England or Wales because you do not always need to attend appointments at a solicitor’s practice. You have the option to communicate in writing/e-mail, speak over the phone or arrange Zoom meetings. • Law Society (Find a Solicitor) – You can search and find an approved Professional Negligence Solicitor on the Law Society Register. • Experience and Knowledge – While choosing a Professional Negligence Solicitor, consider the solicitor’s experience and knowledge in handling cases in this area of law. You can ask the right questions to consider whether a particular solicitor is right for you, for example: - Have you handled a case similar to this one previously? - What sort of cases do you deal with the most? - How regularly will I be updated? - How much is the case likely to cost? - Who can I contact with an enquiry if you are out of the office? - Will you be assisted by a paralegal? - Are you staying with the firm long-term? • Ready for Trial – A Professional Negligence Solicitor should be confident to litigate a highly meritorious claim. In certain circumstances, settling claims with high prospects of success outside of the court system may be quicker however, you may not always get the outcome that you want. AJames Solicitors comprise a team of experienced Professional Negligence Solicitors. Visit AJames Solicitors website for more information, or contact them on: 0161 791 6666/07729461166 for any legal queries, or send a message with your enquiry using the link below and a member of the team will contact you: https://www.ajamessolicitors.com/contact Disclaimer This disclaimer asserts that the information published in this article, the content of the information discussed or comments provided do not constitute legal advice, or other professional advice or services. The information contained in this article is for general information purposes only. No warranties or representations whether express or implied are given, about the completeness, accuracy, reliability, suitability or availability of the information contained in this article for any purpose and excludes any liabilities that may arise out of, or in connection with the use or misuse of the information. Any reliance you place on such information is therefore strictly at your own risk. No lawyer-client relationship exists and you are required to seek your own independent legal advice.
by By Sebina Noreen Malik 17 May 2022
There are times when two or more parties are unable to resolve a dispute, or reach an agreement for example, in a breach of contract matter the parties may fail to reach a resolution and long terms work relations may also be put at risk. An Alternative Dispute Resolution (ADR) method may be useful in these situations to assist parties to settle disagreements without going through the court litigation process. ADR has become extremely popular and is considered at the early stages of a dispute in an attempt to avoid court proceedings, as well as during the litigation process.
by By Sebina Noreen Malik 16 May 2022
Commercial litigation is a legal action that may be considered when disputes arise between businesses, organisations or partnerships for example, contractual disputes. For most, litigation can be problematic and assessing risks in commercial litigation is an essential procedure when a claimant is deciding whether to issue proceedings in the court, or to negotiate a settlement. Commercial Litigation Solicitors must evaluate the legal risks a company or an individual may face now, as well as in the future and follow a pre-action process before any court action can be considered.