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Co-written with Serge Rosenzweig. Corporate lawyer, member of the Paris and New York Bar Associations, and specialist in advising entrepreneurs and startups. He is also a legal expert at EDHEC Entrepreneurs.

What is at stake?

<aside> 🔥 How do founders define their roles, contributions, and respective powers within the startup?

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Why is it important?

Collaboration among founders is crucial for the successful management of an entrepreneurial project. While the initial relationships among a startup's founding members may be implicitly structured, it is important to define the rules officially as quickly as possible to establish long-term organizational frameworks among the partners.

Defining the relationship among partners helps to:

➡️ Clarify roles, responsibilities, and contributions, to avoid potential misunderstandings and conflicts;

➡️ Anticipate various scenarios that they may encounter and to protect the interests of each party in case of disputes, resignation, bankruptcy, etc ;

➡️ From a legal standpoint, defining the distribution of power among partners allows for determining the rights of the partners and the conditions associated with them during entry, throughout the duration, and upon exit from the company.

Three actions to take right now

1️⃣ Take the time to define the expectations and contributions of each founder

• Define the contributions (financial, skills, network, etc.) of each founder.
• Define the role of each founder.
• Express each founder’s personal objective in creating the startup.
• Listen to the aspirations of each founder for the future of the startup.

This reflective exercise is crucial as it encourages questions that may not have been raised before.

2️⃣ Implement "best practices" to limit risks

The shareholders' agreement should be seen as an insurance policy.

It helps to:

• Define the relationships among shareholders and to specify mutual commitments.
• Determine the operating rules of the company (voting rights, share transfers, decision-making processes, non-compete clauses, exit clauses, etc.).
• Formalize the equity distribution among founders.

This agreement should be signed at the creation of the company because:

• Every moment that passes without this agreement poses a risk.
• It allows for peaceful resolution of issues while everything is going well.

The process of drafting a shareholders' agreement is not the same as for other legal documents. What is important is the discussions that the shareholders have before signing the document. It is more like couples therapy than a legal exercise! That's why, in my opinion, if you want it to be done properly, it should be done with a third party. Doing it on your own, even with a great template, is pointless; it only gives the illusion of having gone through the exercise when it hasn't been truly done.

*Serge Rosenzweig — Corporate lawyer, member of the Paris and New York Bar Associations, legal expert at EDHEC Entrepreneurs.*