FAQ


In strict legal sense, the answer is no. Entering into Founders’ Agreement with your co-founders is not necessary. However, putting your relationship with co-founders on papers and defining rights and liabilities of each other (including designations, role etc) would always be beneficial. This agreement can provide broader strategy of company’s working i.e. who will be the CEO, who will head marketing, how the board will function, how shares will be allotted, how profit sharing will work and most importantly how a new person can enter or an existing co-founder will exit. So technically, it is not necessary to have founders’ agreement but it makes sense to have this one. 

 

No, you don’t legally need  a co-founder at all. However from the perspective of VC/PE , a startup which is totally dependent on one person may not be good idea unless they see something unique in you or your startup. So having a co-founder makes a venture less risky from the point of view of an external investor. The reasons being that one person cannot be master in all the fields and secondly due to its very nature no one can predict eventualities like health or family problems etc. Even from your perspective having a trusted person will be helpful while taking crucial business decisions, in emergencies and so on.  

In the investment banking parlance, a teaser or the information memorandum is the document which is prepared by the company to give insight to the prospective investors. Depending upon the nature, size and philosophy of the founders, it may give details about the company in brief including current size, financials (if any), investment rationale for investors, industry outlook including size etc.  

There can be many reasons for the fund requirement in a startup; there may be a situation for a startup that they have a brilliant idea but they don’t have enough capital to invest in the business, so they might need funding from outside to implement ther idea and achieve the goal. Some may need funds for further growth as we all know that every business organization wants to grow and for that they may need more funds to grow, scale up and compete with the best in the industry. There are many types of fundings a startup may get; these include investments from angel investors, venture capitalists and investment from strategic investors etc. 

Term Sheet is a document containing the points on the material terms which might have been agreed between the parties before final agreement. This sheet is not binding on any the parties to contract but this this sheet helps the legal counsel to draft the ‘final agreement’ upon which the parties have already decided and given their consent.

Transaction Documents are those legal documents which are executed in corporate events like funding, acquisitions, etc. They basically cover all legal aspects pertaining to any deal or transaction. For example in funding transaction, usually a Term Sheet, Share Purchase Agreement, Shareholders Agreement may be executed. Further depending upon the nature of transaction, other agreements / documentation including Key Employment Agreement, Agreement relating to intellectual property or any other legal documentation may be required also.   

A business cannot work in isolation. It needs to communicate regularly with vendors, employees, advisors, clients and so many other people like potential clients or potential investors to achieve its goal. So while sharing information with the aforementioned people it may be a necessity to execute an NDA as businesses should have some legal papers to support in case any confidential information gets leaked or is utilized in the manner not so intended. 
So an NDA protects your business proprietary information and casts obligation onto the receiver to treat this confidential information properly in the given manner. Further, in today's era of dynamic business environment, a lot of new business ideas and innovations are conceptualized every day and protecting them becomes  an absolute necessity. So whether you are a startup, software business, hardware business, manufacturing business or any other established business,  an NDA or a confidentiality agreement is advisable  to protect your business interest and its proprietary information.

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