Most founders sign a shareholder agreement once, quickly, and never read it again until something goes wrong. These are the clauses that matter most when it does.
1. Vesting
Founder shares that vest over time protect everyone if a co-founder leaves early. Without vesting, someone who leaves after six months can keep the same stake as the people who stay.
2. Good and bad leavers
The agreement should say what happens to a departing founder’s shares, and at what price, depending on why they leave.
Key point
Deadlock is not a rare event. Two equal founders will disagree on something important within the first three years.
3. Deadlock
Equal shareholders need a way to break a deadlock, whether that is a chair’s casting vote, mediation or a buy-sell mechanism.
4. Reserved matters
List the decisions that need everyone’s consent, and keep the list short. A long list hands a veto to the smallest shareholder.
“It is the cheapest dispute you will ever avoid.”
5. Transfers and exits
Pre-emption, drag-along and tag-along rights decide who can sell, to whom, and on what terms when an investor or buyer arrives.
