TOFI August 10, 2015 Legal: Hassan

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Corporate Law for Founders… a founder’s perspective

Kamal HassanCEO, Incmind

Aug 10, 2015



Sole Proprietorship

Partnership

Corporation

- you own 100%

- partners jointly liable

- sell shares, give options



Shareholders

Board of Directors

Officers

Corporation

Run things

Liable

Protected



Who owns/controls the company?

What does the company own?

Risk of any lawsuits?

Only three legal questions really matter






Good governance for private companies

Governance



Who owns the company?

“Cap Table”

Minute Book



Who owns the company?

“Cap Table”



Do you really own your company?

Debt holders get paid first

Common shareholders last

Preferred shareholders next



Financing terms matter … valuation is for suckers

Debt holders get paid first

Common shareholders last

Preferred shareholders next



Who controls the company?

“Any shareholder with >12.5% of theshares has the right to name a director”









What does the company (really) own?

Assets

Knowledge

Relationships

Possession (and contracts )

IP transfer, NDA, non-compete ( contracts )

Contracts



Local Laws

(i) is contract legal?(ii) if there is no contract

[A] promises to [give X] [to B]

Contracts

[if B does Y] … if … and … if …... if … before … by … and …

Local Courts (or Arbitrator)

Contract = a (written) agreement/promise



For funding you will share your contracts in a data room









In compliance with laws?

Complying with contracts?

Contracts cover everything?




Contracts … between friends?

I’m working harderand you have more

I’m tired of this, andso is my husband

I can’t take thisany more, I quit

Signs happily Signs awkwardly Renegotiates See you in court



Cofounders? Vesting!

VestingIf I or my cofounder leave the company, for anyreason, before February 1, 2019, the company

has the right to buy back our ‘unvested’ sharesat the same price we paid for them.

www.incmind.com/blog

4 year vesting, 6-12 month cliff

If you have investors

… then No!

Shotgun?







-

Shareholders

-

(Board of) Directors

-

Officers

-

financing terms

-

Contracts

Minute Book

Data Room

-

Contracts for important stuff-

Vesting for shareholders



Founder Institute Perspective

You promised to issue 3.5% warrants to Founder Institute•

1% to grads (you), 1% to mentors, 1.5% to Founder Institute

•

if you drop out post Aug 24th FI decides if they want to keep

you in the warrant pool or not (if think you’re weak = no)

Warrants require a corporation (new or existing):•

warrant signing deadline: Aug 24th at 5:00 pm

•

need your corporate number first (register by Aug 20th)

Sign and upload the warrant documents

•

board consent = you have power to sign•

no negotiation on terms (too hard to track)

•

FI global reputation = must act in good faith

Kamal camping Aug 13th - 23rd : ask now or read above

Documents

TOFI August 10, 2015 Legal: Hassan