Clauses you must include in a shareholders’ agreement
These are the clauses that protect the company if you write them at the co-founding stage. Once a dispute starts, they are no longer available to you.
Vesting: equity locks in over time
Lock in all the equity on day one and the co-founder who leaves six months later walks away with it. The standard is vesting over four years with a one-year cliff.
Share recovery on early departure
Separate voluntary departure, departure with fault, and unavoidable circumstances, and set the buyback price and procedure for each. If you do not write down the pricing method in advance, that itself becomes the dispute.
Other clauses worth including
- Non-compete: during employment and for a set period after leaving
- IP ownership: work created during employment belongs to the company
- Right of first refusal: existing shareholders come first, before shares are sold outside
- Voting agreements: director appointments and other key resolutions
- Stock option pool: the share to set aside in advance
A shareholders’ agreement is a document you write while everyone still gets along. By the time you need it, agreement is no longer possible.
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