Knowledge Base: FounderCatalyst Documents

We produce a set of ten document types that will be required by both you and any potential investors as follows:

1. Subscription and Shareholders' Agreement

This regulates the terms of the investment, including what happens in connection with the investment and the warranties given by the founders to the new investors, and Stipulates the terms for the future partnership, including decision-making protocols, transfer of shares, governance structure, and dispute resolution mechanisms.

2. Articles of Association

A company’s written rules that govern how it operates, these are legally binding. All limited companies in the UK are required to have articles of association. When a company changes its articles, the new version must be sent to Companies House within 15 days. Changes must be legal and fair, and in the best interests of the company as a whole.

3. Disclosure Letter

A key document in a transaction involving the acquisition of the shares in, or the business and assets of, a private limited company. The disclosure letter is prepared by the seller of the shares or assets, and includes general and specific disclosures regarding the seller's warranties in the acquisition agreement. A disclosure letter is important because it:

• Protects the seller
• Reduces the risk of warranty claims
• Avoids breach of warranty

4. Founder Services Agreement

A contract that outlines the terms of a founder's employment with a startup, including their responsibilities, salary, and equity compensation. It's a hybrid of an employment agreement and a founder's pledge, and is typically signed before a startup's first funding round or when a founder starts receiving a salary.

A Founder Service Agreement protects the company and the founding team, and includes provisions such as:

• Equity vesting schedule
• Intellectual property (IP) rights
• Confidentiality clause
• Exit terms
• Liability responsibility
• Share of future profits

5. Cap Table

The Capitalization table shows a company's ownership structure. It lists a company's securities, such as stock, warrants, convertible notes, and equity ownership grants, and details who owns them. A cap table also shows how ownership and value change over time. Here are some things a cap table can show:

• Shareholders
• Share price
• Dilution
• Vesting
• Valuation

They are important for investors to decide how much to invest in a company.

6. IP Assignment

An Intellectual property assignment, is the transfer of ownership of an intellectual property right from one party to another. The party that transfers the rights is known as the assignor, and the party that receives them is the assignee.

Some examples of intellectual property rights include: Copyrights, Registered trademarks, Patents, and Designs.

Once an IP assignment has been made, the assignor is no longer the owner of the rights and can only use them if the assignee grants them a licence.

7. Term Sheet

This is a non-binding document that outlines the main terms and conditions of a transaction between parties. Term sheets are typically negotiated and signed at the beginning of a transaction. They help to streamline the negotiation process and ensure that all parties reach a mutual understanding before committing to a legally binding agreement.

8. Board and Shareholder Resolutions

Board resolutions and shareholder resolutions are both decisions made by a company, but they are made by different parties and for different reasons:

• Board resolutions Decisions made by the board of directors, which can cover a wide range of topics, including appointing directors, authorising loans and contracts, and more. Board resolutions are a key part of a company's day-to-day operations and strategic planning.

• Shareholder resolutions Proposals or decisions made by a company's shareholders, which can be filed by a single shareholder or a group of shareholders. Shareholders can file both binding and non-binding resolutions, and they can use shareholder proposals to publicly raise important matters and interact with the board of directors.

In some cases, the board of directors must present a resolution to the shareholders for a decision to be made, and then a sufficient number of shareholders must pass the resolution for it to take effect.

9. Non-Disclosure Agreement

Also shortened to NDA - a legally binding contract that prevents the disclosure of confidential information to third parties.

NDAs are used to protect information such as: business or proprietary information, intellectual property, unpublished research results, and trade secrets.

NDAs are important because they allow parties to discuss ideas freely without worrying about the information being misused or shared without their consent. They are also valuable for protecting the ability to patent an invention.

10. Investor Share Certificates

A legal document that proves a person's ownership of shares in a company. It's a receipt for the purchase of shares and includes information like:

• The name and address of the shareholder
• The number of shares owned
• The type of shares owned
• The date the shares were issued
• The nominal value of the shares
• The amount paid for the shares
• The company name and registration number
• A corporate seal
• Signatures

Share certificates are important for a number of reasons, including:

• Proof of ownership
• Protection of shareholder rights
• Security
• Corporate transactions