The Founder Equity Agreement is a crucial document used during company formation or early stages of business development in Canada. It serves as the foundational contract that governs the relationship between co-founders and their ownership stakes in the business. This agreement is essential when two or more individuals establish a new venture and need to formalize their equity arrangements, responsibilities, and commitments. The document typically includes detailed provisions about share allocation, vesting schedules, intellectual property rights, and founder obligations, all structured within the Canadian legal framework. It must comply with both federal legislation (such as the Canada Business Corporations Act) and relevant provincial laws, particularly securities regulations. The agreement is especially important for protecting all parties' interests and preventing future disputes by clearly documenting the founders' arrangements at the outset of their business relationship.
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1. Parties: Identification of the founding members and the company as parties to the agreement
2. Background: Context of the agreement, including company formation and purpose
3. Definitions: Key terms used throughout the agreement
4. Share Allocation: Details of initial share distribution among founders
5. Vesting Provisions: Terms of share vesting, including schedule and conditions
6. Founder Commitments: Roles, responsibilities, and time commitment expectations of each founder
7. Transfer Restrictions: Limitations on the transfer of shares and right of first refusal provisions
8. Intellectual Property Assignment: Assignment of IP rights to the company
9. Confidentiality: Protection of company and founder confidential information
10. Termination: Circumstances and process for terminating founder involvement
11. Dispute Resolution: Process for resolving disputes between founders or with the company
12. General Provisions: Standard legal provisions including governing law, amendments, and notices
1. Non-Competition: Restrictions on founders engaging in competing businesses, used when specific competitive concerns exist
2. Non-Solicitation: Restrictions on soliciting employees or customers, included when protecting business relationships is crucial
3. Tag-Along Rights: Rights of minority founders to join in sale of shares by majority founders, used in cases of potential future sales
4. Drag-Along Rights: Rights forcing minority founders to join in company sale, included when future exit possibilities are considered
5. Founder Loans: Terms of any loans between founders and company, included if initial capital is provided as debt
6. Special Voting Rights: Any special voting arrangements or veto rights, used when founders have different levels of control
7. Death and Disability: Provisions for handling shares in case of founder death or disability, included for risk management
8. Family Law Compliance: Provisions addressing marriage breakdown implications, included when required by jurisdiction
1. Schedule A - Share Capitalization Table: Detailed breakdown of share ownership and types
2. Schedule B - Vesting Schedule: Detailed timeline and terms of share vesting
3. Schedule C - Founder Details: Specific information about each founder including contact details and role description
4. Schedule D - IP Assignment Details: Specific intellectual property being assigned to the company
5. Schedule E - Company Bylaws: Reference to or inclusion of relevant company bylaws
6. Appendix 1 - Restricted Activities: Detailed list of restricted activities under non-compete/non-solicit provisions
7. Appendix 2 - Form of Share Certificate: Template for share certificates to be issued
8. Appendix 3 - Spousal Consent: Forms for spousal consent to share restrictions where required
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