We know how much a founder has on their plate, that’s why we’re on a mission to make your legal admin easier. With the docs sorted, you can focus more on achieving your dreams.
There are many different legal documents you need to start and run your business. In this article, we outline our pick of the ten essential legal documents that UK startups need to start and grow:
It depends on the quality of the template. There has to be a level of customisation for legal documents to protect all parties effectively. Using templates can be very efficient, but it’s rarely a great idea to copy-and-paste a random document you find online.
Why? Because it’s not created specifically for you. You can’t be sure who wrote the contract, what exact business exchanges it was designed to address, or even what legal jurisdiction applies.
When you create a legal document on SeedLegals, we take you through a series of questions to customise the document for your company and your specific situation. In just a few minutes, you’ll have a complete, correctly-worded document ready to sign. In case you have any questions along the way, there is also a team of experts on hand to help. This way, we combine the efficiency of customisable contracts with personalised guidance to help you create reliable legal documents.
The list below covers the essential documents you need to protect your business, your employees and your external contractors. All these docs are available to easily customise, share and sign on SeedLegals.
For idea-stage companies: The Founder Pledge protects the founders and the company if things go wrong.
Starting a business is an exciting time. You have a great idea and a vision to change the world. You might even be in business with your friends or family, but it’s still important to ensure that you plan for the worst while still hoping for the best.
Without the right documents in place, you could end up not being able to do much if your co-founder is not acting in the company’s best interests.
The provisions in a Founder Pledge outline the duties of every founder in relation to the company. It also sets out why and when a founder can be terminated and what to do if a director leaves the company, as well as other clauses protecting the company’s property and interests.
The Founder Pledge is quite lightweight so when you start getting beyond just the idea stage and begin moving towards that first rounding round, you should consider the more serious Founder Service Agreement which contains more provisions.
For companies that are just getting started: The Founder Service Agreement sets out how a founder will work to build the business and what will happen if there’s a fallout or dispute.
When the company is about to raise its first funding round or starts paying a salary to the founder, you should upgrade your Founder Pledge to a Founder Service Agreement.
The Founder Service Agreement is basically a combination of the Founder Pledge and an Employment Agreement. Like the Founder Pledge, it includes terms about the founder’s duties and obligations toward the company, and how the company’s interests can be protected in case of a breach. But it also has sections that you’d find in an Employment Agreement – such as salary, holiday entitlement and time off.
Arguably the most important thing a Founder Service Agreement does is establish the reverse-vesting schedule for the founder’s shares. The schedule ties the number of shares the founder freely owns to the amount of time they work for the company. For example, if you had 30% of the share capital with a 30-month reverse-vesting schedule, 1% of the shares could vest each month, until all your shares are fully yours.
It might seem against the founder’s interests to have their shareholding subjected to reverse-vesting, but it’s an effective way to protect the company in case there’s a dispute or fallout. Without these provisions, you could end up in a situation where a co-founder leaves with a large amount of equity. This could leave your company less attractive to investors.
Other problems can arise if a large shareholder with voting rights leaves, since they may be able to block key company decisions. Plus, they would benefit from the upside of an exit for their full share allocation, even though they are no longer contributing to building the company. Founder vesting strikes a fairer balance between your performance and/or time committed to the business, and the value realisation of your shares.
Still not sure if you need a Founder Pledge or Founder Service Agreement? We’ve explained how to set the terms for your Founder Pledge or Founder Service Agreement on SeedLegals in our article Founder Service Agreements explained.
Make sure you have an IP Assignment Agreement with everyone who’s worked on your product or idea without a proper contract in place – this gives your company full ownership over their contribution.
When you first start building your business, there can be a lot of people working on your product and creating intellectual property objects, such as your website, design and logos. These might be co-founders, team members, advisors, contractors and even friends and family.
The IP that contributors create, even if it’s clearly for your business, doesn’t necessarily belong to the business unless you have an IP Assignment Agreement in place. Founders who don’t protect their IP risk an expensive dispute which can make the company less attractive to investors.
An IP Assignment Agreement ensures that any work done for your company, even if it takes place before the company was officially incorporated, legally belongs to your company.
Ideally, you should make sure you have an IP Assignment Agreement in place with everyone who has worked on your product or for your company, even if you don’t consider their contribution to be significant. This can help you avoid disputes in the future.
A Non-Disclosure Agreement protects sensitive and confidential information from entering the public domain.
If you plan to discuss confidential information with people not currently engaged by the company, for example, advisors, partners or potential employees, you should ask them to sign a Non-Disclosure Agreement (NDA).
An NDA is a commitment that the person receiving sensitive information about your business during discussions will not disclose that information to anyone else or use the information for their own benefit. NDAs are common in sectors where a disproportionately large part of the value of the company comes from their intellectual property.
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