Shareholders' agreements for founders: the decisions that protect the project

There is a phrase that captures almost everything a founder needs to know about a shareholders' agreement: what is agreed in the calm avoids the lawsuit in the storm. When several people decide to go into business together, they rarely stop to consider what will happen if one wants to leave, if an investor comes in, or if a serious disagreement arises. The shareholders' agreement sets those decisions down in writing while there is still trust and no one has any reason to distrust. This guide runs through the decisions that really matter; how the Supreme Court treats the effectiveness of these clauses is analysed in a companion piece.

Splitting the equity without regret

The most common mistake is to split the equity 50/50 "because we are friends". A perfectly equal split condemns the company to deadlock the moment a disagreement arises, because no one can break the tie. It is better to split according to each partner's real contribution —capital, dedication, know-how, client base—, to reserve a margin for future key employees and for the investor who will come in, and to set down in writing who contributes what and in exchange for how much. That conversation, awkward at the outset, is the one that prevents conflict at the end.

Tying the team to the project: commitment, dedication and vesting

In a young company the value lies in its founders, so the agreement must ensure that those who build it stay with it.

• Dedication and exclusivity. Each partner takes on specific duties and a commitment of dedication, with a non-compete clause during the term of the agreement and for a period afterwards, and non-solicitation of clients and employees.
• Vesting. This is the key piece: the stake vests over time. A common scheme is four years with a one-year cliff. A founder who leaves earlier must transfer the portion not yet vested at a price agreed in advance. That way, whoever stops contributing also stops sharing in the value the others create.

Governing who comes in and who leaves

The agreement governs the circulation of shares so that no one is trapped and no one can force an unfair outcome:

• Lock-up. An initial period —three years is common— during which no partner sells.
• Right of first refusal. Before selling to a third party, a partner must offer their shares to the others on the same terms.
• Tag-along. If a partner sells a controlling stake, minority holders may join the sale on identical terms.
• Drag-along. Conversely, a qualified majority may compel the rest to sell when an offer for 100% arrives: this is what makes the company saleable.

Preventing deadlock before it happens

Two provisions make the difference on the day a disagreement arises: reinforced majorities for structural decisions —so that no one decides the essential alone— and a deadlock protocol that, faced with a persistent tie, forces good-faith negotiation and, failing that, a decision by an independent expert. Without that protocol, a disagreement can paralyse the company indefinitely.

The mistakes that cost the most

• Not signing it, or signing it late, when the conflict already exists and no one will give way.
• Copying a template without adapting it to the reality of the project and the partners.
• Not making it omnilateral. Having all the partners sign is not a formality: it is what gives it real force, as the Supreme Court's case law confirms.
• Forgetting intellectual property: everything created by partners and employees should belong to the company, not to its author.

How we handle this at RCM Legal

At RCM Legal we support the founder from the very first decision: we help split the equity sensibly, we design the vesting and the lock-up clauses that protect the project, and we govern the entry and exit of partners so that the company is governable and, when the time comes, saleable. If you are setting up your company or about to bring in a partner or investor, tell us about your case: what is agreed today, calmly, is what avoids the lawsuit tomorrow.