Visionary Entrepreneur

Visionary Entrepreneur: The Importance of a Clear Vision when Working with Co-Founders and Legal Team

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Visionary Entrepreneur: The Importance of a Clear Vision when Working with Co-Founders and Legal Team

22 February 2023

All you dream about is starting your own business. There is a big idea in your head and on your heart and you just know it can be successful. It is exciting being a visionary entrepreneur but also challenging and sometimes overwhelming. Overwhelm can sometimes occur when you think about where you want your business to be in the future to be but don’t reflect this anywhere, including in your legal work. So it is important to get that vision out of your head and articulate it, This will prevent confusion when working with a co-founder and your legal team. But articulating your vision is more than that.

A clear vision is how you interpret the direction the future of the world is going in and how your startup fits in.

For example, articulating your vision involves asking yourself:

  • What makes you passionate?
  • How will your business fulfil people’s wants or needs?
  • How are you going to structure the price for your goods or services?
  • Who is your target audience?
  • What are the goals for the first three months?
  • What do you need to achieve in the first year?
  • What does business success look like in three years?

It is also a clear statement on why your startup is different, what makes it stand out. While it is crucial to get this right from the beginning do not let this paralyse you from making a start on articulating your vision. Your strategies to achieve your vision may change and so they should as your business grows and has access to more resources. While your vision will not change, the path to success can change when you take feedback onboard from your inner circle and advisors and try different things, and in response to economic pressures.

Working with a co-founder

Deciding to work with a co-founder can be hard unless you have a shared vision. This is why you need to clearly articulate your vision both verbally and into a statement so you are both working towards the same outcome. You may both think you understand the vision and are working from the same page but this can cause confusion and disagreements without putting it in writing. Disagreements and confusion can stem from having different ideas about running the business or who is responsible for different parts of the business. Having a different vision with your co-founder can be a reason to part ways unless you write down the vision. Once it is in writing, it makes easier for you both to make good business decisions. You also have something concrete to share with employees, potential investors and your legal advisor.

Working with your legal team

Your vision is important when working with your legal team. Why? Because you want your legal documents to reflect your vision, what outcomes you want to see from your venture, and the footprint you want to leave in the world. So you need a clear vision about what you want to achieve for your legal team to prepare legal documents that mirror it. For example, you may have a vision for a business run with sustainability as the focus. In this case, your legals and the way you work internally should be consistent with this vision.

Your legal team can draft policies to deal with how you will source various materials sustainably and practices to make sure you leave a carbon neutral footprint. Your lawyer will always guide you on the best ways and legal documents to reflect your vision. This will ensure that your team and external stakeholders understand it and that their contributions align with your business.

Carry the vision for your business into all your relationships and agreements with stakeholders. For example, it might be that you articulate your vision in supplier agreements, policies, shareholder agreements, and each facet of your business that involves a legal relationship.

Vital communication tool

A clear vision is not just for you as a visionary entrepreneur, or your co-founder and legal team. It is a vital communication tool to get your message out to the world. More than ever before, consumers look into the companies behind the goods and services they purchase. The want to support businesses that are compatible with their values. So having a clear vision statement tells potential customers the purpose of your business and the motivation behind it. This will help you to attract your target audience, and earn their trust and loyalty.

Articulating your vision

A clear vision gives you direction so you can focus on what is important. It helps you prioritise what you need to do to breathe life into your startup. This will help you when making the tough decisions. So how do you articulate your vision?

Articulate your vision by writing it down in a statement. This should be the starting point of everything you do. Make your vision statement short and meaningful. Consider the following when writing it:

  • Why. Why are you starting the business? What is its purpose? What problem does it solve or why is it important? Who is your target audience?
  • What. What do you offer? What do you want to achieve?

Here are a few vision statements of well-known companies to give you a little more insight:

  • Microsoft. To help people and businesses throughout the world realise their full potential.
  • Coca-Cola. To craft the brands and choice of drinks that people love.
  • Nike. Do everything possible to expand human potential.

You can see how unique each one is. Now you need to create your own. Here are four steps to help you:

  • If you have a co-founder or a business mentor, sit down together and brainstorm ideas.
  • Start with the purpose of your business and why your products or services matter to your target audience.
  • Now think about what the business does. What are the products or services you offer?
  • Once you have written all this down, summarise it into a single statement of one or two sentences. It should be clear and concise so that anyone outside of your business can understand it easily.

Now you have your vision statement shout it out to the world.


A well thought out vision is the key to success. It helps you and your co-founder work towards a shared vision and to avoid disagreements. Writing a vision statement articulates the purpose of your business and what you offer so that your legal team can draft legal documents that reflect the business. It also lets the world know what your business wants to achieve.

So it is important to take the time to articulate your vision in writing.

As always, if you have questions or need clarifications, reach out for advice.

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Start-up business

Importance of legal documents that reflect the vision for your start up business  

Photo by Gerber86 from Getty Images Signature 

Importance of legal documents that reflect the vision for your start up business.

30 January 2023

Launching a startup business is exciting and stressful all at the same time. And if it is your first business, there is so much to learn. Then the more you learn the more you have to do. It can become an endless cycle of the more you learn, the more you need to know.

What is important is that your legal documents reflect your vision for your startup business. You need a lawyer that understands your business and what you want to achieve so you have the legal documents you need. This is vital to your success.

What is your vision?

Your vision is the driving force behind why you are going into business. It is what you want to be known for and the mark you want to leave in the world. When your lawyer knows about your vision they will know what is important to you and what to include in your legal documents to safeguard your vision. Can you clearly articulate your vision to others? It is important to write a vision statement for your business. Here are some thoughts:

  • What makes you passionate?
  • How will your business fulfil people’s wants or needs?
  • How are you going to structure the price for your goods or services?
  • Who is your target audience?
  • What are the goals for the first three months?
  • What do you need to achieve in the first year?
  • What does business success look like in three years?

Communication is key

Communication is key. Use clear, open communication with your lawyer. Do not be shy. Let your lawyer know the goals of your startup business. That way they will know exactly the legal documents you need to protect you and your business.

When you are new to the world of business, you may find it difficult to voice your goals. But do not let this hold you back. Do not be afraid to ask questions or to express your opinion. Remember, it is your startup business, and you need to tell your lawyer your vision or you will not get the legal documents you need. They are there to help you so help them to help you.

If you have trouble speaking up, prepare for each meeting. Write down the things you want to ask your lawyer. Go to your next meeting armed with the list of questions. That is what your lawyer is for. To talk over your concerns, ask questions and to give you good legal advice.

Get involved with the process

Get involved with the process while your lawyer drafts up your legal documents. Your lawyer will be happy to answer your questions and to have your input. After all, it is all about you and your startup business. Revise each draft to ensure the end result reflects your goals and the vision for your startup business.

Understand the legalities

Do you understand what you need to comply with to legally run your startup business? If not, then you need a full understanding of your obligations to ensure you do not put your business at risk.

Are you going to hire staff? Yes? Then you need to understand the occupational health and safety laws and employee standards. You also need to know what the laws are about discrimination; minimum pay rates; employee entitlements; tax and super for your employees. Have your lawyer draft up employee contracts. Or you may have a partner in the business so you will need a partnership agreement that outlines the responsibilities of each partner. Maybe you are going into business with someone and need a co-founder’s agreement.

These are the things you need to talk to your lawyer about. Once they have insight into your vision for the business, they will advise what documents you need.


Hiring a lawyer to draft legal documents when starting a business is vital for its success. But to get legal documents that reflect your vision for the business you need to communicate your thoughts, ideas and opinions clearly. Do not be afraid to speak your mind or to ask questions. That is what a good lawyer is for—to listen, ask questions and to give you good legal advice.

They need to understand your vision to draft the legal documents you need so do not be afraid to tell your lawyer what you want to achieve no matter how grand your vision!

As always, if you have questions or need clarifications, reach out for advice.

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Taking up your former employer's business opportunities after resigning

Taking up your former employer’s business opportunities after resigning

Photo by Azamat Zhanisov on Unsplash

Taking up your former employer’s business opportunities after resigning

Updated: 6 January 2020

You’ll likely have access to business connections and opportunities after working with a company for some time, especially as a director with access to key information.

So should you make use of the contacts and opportunities?

Here’s what you need to know based on a court decision.

The case we’re going to look at is Southern Real Estate Pty Ltd v Dellow [2003].

While it is from 2003, it’s still cited in decisions as recent as 2018 like Advanced Fuels Technology v Blythe & Ors (2018). 

Key principles

So, if you are thinking about pursuing business opportunities, consider these key principles from the Southern Real Estate case: 

1. Best interests of the company

Directors have both statutory and fiduciary duties.

Directors must act in the best interests of the company and not promote their own interests or the private interests of others.

2. Planning for your resignation

You can't act against the company’s interests with a view to resignation and involvement in a competing business. This is a clear breach of both statutory and fiduciary duties, even if those steps involve no misuse of confidential information.

3. Director’s statutory and fiduciary duties continue

The statutory and fiduciary duties of directors don’t simply end at the point of resignation. 

But, there is uncertainty as to when a former director might properly begin to compete with the company.

However, here’s what we do know:

If a former director secretly prepares to compete with the company right after resignation, and does so, there is no need to determine at when director commenced a competing business - there's a clear breach of fiduciary duties.

These principles are important to learn because of a myth about the lack of a restraint or an employment contract for that matter.

Number #1 myth - no employment contract or no restraint = no restraint

The myth - if there’s no restraint in an employment contract the employer can’t take action against you. 

Now, it's a myth because we know if you are a director, you have fiduciary duties.

And if you are an employee, you have a duty not to use your position (section 182 Corporations Act) or information (section 183 of the Corporations Act) to gain an advantage or harm your former employer.

We know this because of Advanced Fuels Technology v Blythe & Ors [2018] (AFT), which we discussed in Director and employee duties after resigning from an Australian company.

In the AFT case - there was no restraint in an employment contract, but the director and an employee were accused of breaching their duties under the corporations Act 2001.

Key take aways

If you are a director or officer, don’t plan your exit while you are working for a company.

If you are an employee, don't use information you gained from your employer to set up a competing business (regardless of whether you do or don't have an employment contract or post-employment restraint in one).

Also - if you have made a mistake, get good legal advice before you reply to any letter telling you to stop competing; commonly known as a cease and desist letter.

Do you have questions or comments about taking up business opportunities after employment? Be sure to leave them below.

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Director pay at an Australian startup company

Director pay at an Australian startup company

Photo by Mimi Thian on Unsplash 

Director pay at an Australian startup company

Updated: 7 December 2019

If you are starting up in Australia, here’s what you need to know about director pay.

First, the Corporations Act 2001 applies to Australian companies. However, it does not prescribe director's fees. 

Rather, there’s a replaceable rule (non mandatory rule) about director pay - it’s in section 202A of the Corporations Act 2001 and here’s what it says: 

The directors of a company are to be paid remuneration that the company determines by resolution.

The company may also pay the director’s travelling and other expenses that they may properly incur:

  • In attending directors meetings or any meetings of committees of directors; and

  • In attending any general meetings of the company

Why some startups don’t pay a director fee

We know the the obvious reason is cash - a lack of it.

But the other linked reason is that one or more directors may have contributed capital and the priority is to reimburse them first before directors fees are paid out.

How to deal with directors pay in a founders agreement

If there are multiple directors (founders), you could set up a founders agreement that deals with founder duties and give yourself some flexibility when it comes to pay.  

Flexible option example

Below is a sample clause that's consistent with the replaceable rule above:

The company will first repay the personal contributions by [director name] and [director name], after the repayment, the Company board will make decisions about director pay by ordinary resolution.

No director fee example

The founders will not be paid a director’s fee..

Now this clause does not mean the director will never be paid for any of their contributions to the Company. It simply means, for holding the position of director, the director won’t be paid a fee.

Now these are early stage options to give a startup flexibility.

Unpaid forever?

Hopefully not!

The concept of non paid directorships is not that uncommon in Australia. 

In fact, you’ll find not-for-profit organisations often have unpaid directorship positions. Board members may include a mix of seasoned business professionals and other members that want to get board experience.

Should director’s remain unpaid forever?

Probably not. If the director duties expand as the company grows, you may add other directors and may want to attract directors with business acumen to sit on your board by paying them!

Also, you’ll likely want to start compensating directors at some point especially if they double up as employees in the business; employees have rights under Fair Work Legislation including the fundamental right of getting paid for work.

Pay implications 

Get tax advice if you are going to pay anything to anyone in your startup. Accountants can tell you all about the different tax treatment for one-off service fees and an ongoing payment. 

Founders agreement vs employee agreement

I always recommend a founders agreement in the early days when the basics of duties, work location, resource contributions need to be set out in writing.

For 2 or more founders, founder's agreements are practical and are inexpensive, but you may not want to use them forever.

At some point an employment agreement will serve you well when founder roles are well defined and you want to outline the details of position and pay in a separate agreement. 


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The difference between legal information and legal advice
Startup, Startup Contracts

The difference between legal information and legal advice

Photo by rawpixel on Unsplash

The difference between legal information and legal advice

Updated: 7 December 2019

So you've probably seen a few disclaimers that read like this 'legal information, not a substitute for legal advice'. We use a disclaimer like this ourselves on our website including our downloads.

I'll explain the difference because its important to know.

Legal information

Legal information is generic. It explains a process, a definition or provides a framework for how something should work. 

Non-lawyers may also provide information.

So, if you are a startup searching the internet for useful resources to use (like this very article or even template downloads) - that's information.


Information is NOT tailored to your situation, it's generic.

Legal advice

Now, on the other hand, legal advice is tailored and typically given by a qualified lawyer. 

Legal advice can be written, verbal or a combination. 

To qualify as advice, the lawyer needs to know your situation, the problem, query or your ideal outcome. And, with this knowledge, a lawyer will give you legal advice or tailor a document based on your situation.

Below are some examples. 

Legal information examples

Legal information may include:

  • article, blog post or fact sheet;
  • template legal agreement (that a lawyer is not updating after your download), you simply download and use 'off-the-shelf'; and
  • it’s always generic and may not be applicable to your situation.

Legal advice examples

Below are some examples of legal advice:

  • you consult with a lawyer and you explain your situation and your lawyer advises you; or 
  • a lawyer prepares legal agreements based on your instructions and their advice to you; and 
  • it’s always specific to your situation.

I wish you every success in your ventures!

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How to serve documents on an Australian company

How to serve documents on an Australian company

Photo credit:  Raw Pixel, Unsplash 

How to serve documents on an Australian company

Updated: 7 December 2019

Do you need to know how to serve a legal document on an Australian company?

Below are the rules from the Corporations Act 2001 (Cth) and the Service and Execution of Process Act 1992 (Cth) to guide you.

When the Corporations Act won't apply

Now, to avoid any confusion, even if the Corporations Act covers a service rule, it won't apply if the  Service and Execution of Process Act applies.

With that in mind, let’s take a look at the service rules below.

Also, for simplicity, I have included the service rules in the table below.

Service rules

Service Rule

Corporations Act 2001 (section 109X)

Service and Execution of Process Act 1992 (Section 9)

Registered Office

Leave the document at or post it to a company's registered office.


Deliver the document personally to a director of the company who resides in Australia or in an external Territory


If a liquidator of a company has been appointed, leave the document at, or post it to the liquidator's office using their most recent address lodged under the Corporations Act 2001 (Cth).


If an administrator of the company has been appointed - leave the document at, or post it to the address of the administrator in the most recent notice of that address lodged with ASIC.

Director & Secretary

Leave the document at, or post it to the alternative address notified to ASIC. However, this only applies to service on the director or company secretary:

  • in their capacity as a director or company secretary; or
  • for the purposes of a proceeding for their conduct as director or company secretary.

Registered body

Leave the document at, or send by post to the body's registered office.

Registered foreign company

Leave the document at or send by post to:  

(a) the address of a local agent of the foreign company notice of which has been lodged under the Corporations Act 2001; or                    


(b) if a notice or notices of a change or alteration in that address has or have been so lodged--the address shown in that last-mentioned notice or the later or latest of those last-mentioned notices.

Key points

You can serve a document on an Australian company following the rules set out in section 109X of the Corporations Act and section 9 of the Service and Execution of Process Act. 

Finally, if a service rule is covered in section 9 of the Service and Execution of Process Act, then section 109X of the Corporations Act won't apply. 

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Starting a new business

How your accountant and lawyer can help you start a new business

Photo by Dean Mitchell from Getty Images Signature

How your accountant and lawyer can help you start a new business

Updated: 19 July 2022

Starting a new business brings with it a series of critical decisions and important actions. You may decide to do everything yourself but consider if this is very wise.

Until you have revenue coming in, you may find it difficult to justify spending too much money. While as a founder this is a good strategy, there are exceptions such as legal or financial guidance. It is imperative all new businesses get excellent advice in both these spaces. Good legal and financial advice when starting a new business will help you set it up correctly and is good for future proofing healthy founders.

Why ask for professional support?

When you are new to starting a business, you are probably not familiar with the legal and financial requirements. Although you can try to learn it all yourself, you are already busy, so you can risk missing something important.

Not only is it smart, it is a good investment getting advice from the professionals. If you do not have a lot of spare cash, ask a lawyer and accountant for guidance and action their advice yourself.

Do you need help starting a small business?

Here are some tips on starting a small business

There is so much to do when starting a business. Building good relationships with a lawyer and an accountant right from the start will set you up for success.

So what is needed when starting a business?

Building the right framework from the beginning will have a huge impact on how the business runs, works and is governed. The commercial platform you build now is the foundation of the business you build.

Your business structure

An accountant or a lawyer can help you set up your business structure. It is important to set up the structure of your business before you start entering into business contracts.

The following are the four business structures you can choose from in Australia:

  • Sole trader
  • Partnership
  • Trust
  • Company.

You can read more about business structures in our article here.

Surviving the first six months

Both a lawyer and accountant can help you to prioritise how to set up your business administration during the first 3 to 6 months. This is a time when it is most intense. The following is the sort of things you may need to do:

  • Registrations and business licences
  • Purchasing business supplies
  • Entering into vendor and supplier contracts
  • Internal agreements like founders and shareholder agreements
  • Hiring staff, issuing worker’s contracts, pay slips and record keeping
  • Registering for GST and PAYG
  • Lodging business activity statements
  • Setting up and maintaining a bookkeeping system
  • Leasing a business premises.

Before you enter contracts 

If your accountant has set up your business structure and it involves a trust, or you are unsure what the setup is, you ask your accountant which structure to use before you enter a contract.

Using the right structure is important for tax planning. For example, it may make more sense to change from being a sole trader to a company.

Shareholder agreements

Shareholder agreements usually have financial covenants about the state of the company’s finances, and an accountant can help you check company financials to confirm they are correct. Keep in mind that shareholders can ask to inspect your company’s books.

Following are examples of financial covenants in shareholder agreements:

  • The books and accounts of the Company truly and fairly reflect the Company’s transactions, finances, assets and liabilities.
  • The Company has lodged or filed all tax and duty returns for all taxes including goods and services tax, income tax, sales tax, fringe benefits tax, payroll tax, group tax and WorkCover levies, where applicable, and has paid all amounts owing as they fall due and has paid all employees superannuation entitlements to the appropriate trustee where applicable.
  • No claim has or will be made against the Company for payment of taxes under the Income Tax Assessment Act 1936 for any tax. 
  • The Company has met all deadlines for repayment of its debts.
  • No petitions, notices or proceedings have come to the Company’s notice, which could result in it being wound up. No orders or resolutions have been made or passed to place the Company in liquidation or provisional liquidation.

Preparing and keeping company records

When you first set up your company, you are going to need to set up company records that either an accountant or lawyer can prepare or help you with. The following are some examples:

  • Officeholder register which is a list of the directors and secretaries
  • Director consents
  • Share applications
  • Share certificates
  • Register of shareholders (aka members)
  • Contracts
  • Financial statements
  • General ledgers and journals
  • Bank statements and loan documents
  • Deeds e.g. for trusts.

In summary

Ask your accountant and lawyer for guidance with:

  • Setting up your business structure
  • Prioritising the administrative tasks you need within the first six months
  • Contracts
  • Shareholder agreements
  • Keeping company records.

Do you have any questions about setting up your business?

A good business lawyer can give you some guidance about how your accountant can help you.

I wish you success in your ventures!

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A practical guide to looking up an Australian business online: ABN and ASIC lookup tips

A practical guide to looking up an Australian business online: ABN and ASIC lookup tips

A practical guide to looking up an Australian business online: ABN and ASIC lookup tips

Updated: 8 December 2019

Knowing how to look up an Australian business online is an important skill.

A company is a legal entity, it can sue and be sued, but you can't sue a business name. 

And if you sue someone personally but you really meant to sue a business, then you've wasted time and money in court. 

Before we go any further, here's a breakdown of the jargon: 

  • ABN = Australian Business Number;
  • ACN = Australian Company Number; and 
  • ASIC = Australian Securities and Investment Commission.

How to start researching a business

You can look for business details such as an ABN or ACN on items such as: 

  • invoice
  • quote
  • receipt 
  • letterhead; and 
  • catalogues

Now you may want to look up an Australian business online for a number of reasons, below are some examples.

Business contract

For a business contract to be legally binding,  you need to record the correct parties business details. 

So it's a good idea to look up a business and make sure that you are have their correct details.

Court case

 If you ever need to take legal action against a business, you need their correct details on your court paper work.

Researching a business partner

Understanding if your business partners has a registered Australian business is important before you do business with them or buy a business. 

So here’s a practical guide to looking up an Australian businesses online.

Let’s start with an ABN lookup because we can get a lot of information from this lookup.

You can complete a search using the business name or ABN. For this example, we are completing a lookup using the business name "collective hub"

ABN lookup

ABN lookup

Here are what the search results look like on the next screen. You can click on the correct business name to get more detailed information.

ABN lookup search results

ABN lookup search results

In the next screen pictured below, we can see business details including: the company name, the fact that the company is private, the company registration date and the registered business names used by the company. 

So in this example, the correct legal entity is Messenger Group Pty Ltd and it uses a number of business names such as Collective Hub, Kick Start Smart and The Messenger sometimes referred to as trading as names or t/a in short form.

Detailed results

Detailed business results

If you are looking up a sole trader, you won't need to complete any of the extra steps for ASIC as described below.

Looking up company details

Now that you know the company name, you can go to the ASIC website and lookup the entity "Messenger Group". 

On ASIC's homepage, you can go to the right hand side of the screen and select Companies and organisations.

ASIC's homepage

ASIC's homepage

Below is the next screen you will see. Select Organisation & Business Names from the drop down. And in the box below the dropdown, enter the company you are searching and click Go. In this example, we are searching for Messenger Group.  

ASIC search screen

ASIC search screen

Next, you will see the search results in a screen that looks like this one below. You can select the correct company to get more information about its director, shareholders and registered address.

ASIC search results

ASIC search results

When you click on the correct company name, you can see extra company details like the ones below and you can select either a current company report or a current and historical company information report. We have samples of each report attached so you can see what each report will look like before you buy.

ASIC Company Details

ASIC Company Details

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3 tips from a lawyer for your startup’s collaborations

3 tips from a lawyer for your startup’s collaborations

3 tips from a lawyer for your startup’s collaborations

Updated: 8 December 2019

So you have found the perfect business partner for your startup, what should you do now ?

Below are 3 tips for your startup's collaborations.

What is a collaboration?

The term collaborate means to work with someone to produce something.  

First step

First,  you can prepare a summary of the key terms on the 'something' you will create. If you are not comfortable with this, your respective lawyers can also do this for you. The summary terms are sometimes called a term sheet or a memorandum of understanding (MOU).

Keep in mind an MOU is not usually meant to be legally binding but it can be - read the fine print. 

Tip 1: Collaboration Agreement

The collaboration agreement comes after the term sheet or MOU and includes the key terms you have negotiated.

Unlike the term sheet or MOU, a collaboration agreement is binding. Also, this agreement will help you come back to what's important if there is a dispute.

What's included?  Key terms like:

  • Collaboration scope - what the collaboration will involve;
  • Resource sharing - client lists, resources and industry contacts?;
  • Confidentiality - how you will treat & protect each other’s confidential information;  
  • Intellectual property - treatment of intellectual property created before and after the collaboration;
  • Dispute resolution - a clause on how to resolve disputes; and
  • Termination - a clause that deals with ending the agreement.

Tip 2: Do your agreements need to be changed ?

You should consider if you will share resources with your collaborator. Do your agreements change as a result ?:

  • Lease - do you need permission from your landlord to sublease?
  • Insurance - do you need to notify your insurer or include additional workers on your workers insurance policy?
  • Shareholders - do you need shareholder permission for the collaboration?; and 
  • Privacy policy and terms and conditions - do you  need explain new processes customers ?  for example about data collection and use to deliver products ?

Tip 3: Exit strategy 

It's a good idea to think about your exit strategy from the start.

To allow flexibility for an exit,  it is a good idea to cover:
  • Termination - when the agreement will come to an end;
  • Notice - the amount of notice needed to end the agreement;
  • Termination consequences - including handover and return of property;
  • Confidential information; and
  • Intellectual property.

Got questions or comments about collaborations? Leave them below.

I wish you success in your ventures!

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3 legal tips for startups allocating shares to an investor

4 tips for startups allocating shares to an investor

Useful tips from a lawyer for startups for allocating shares to an investor. 

4 tips for startups allocating shares to an investor

Updated: 8 December 2019

After talks with a potential investor for your startup,  they may give you a term sheet or memorandum of understanding  (MOU) including the key terms for investment.

At this point, it is a good idea to get your own accounting and legal advice for your startup.

In this article we cover legal tips for allocating shares to an investor.

1. The term sheet or Memorandum of Understanding (MOU)

This document will have the key terms for the investment in your startup and these terms may include:

  • voting;
  • director nomination; and
  • cap for employee share option plans (ESOP).

2. The legal agreements

The legal agreements will include a share sale agreement and a shareholder agreement.

A lawyer can help you ensure that the key terms  in the term sheet or MOU are built into your legal documents. 

The share  sale agreement will outline the terms for the sale including:

  • capital and share allotment;
  • any phasing of share allotment;
  • completion date (date ownership of shares transfers);
  • GST; and
  • termination.

The shareholder agreement outlines the rights and responsibilities of shareholders and includes:

  • voting;
  • board meetings;
  • appointment of directors;
  • further financing;
  • budgets and financial information;
  • confidentiality;
  • non competition; and
  • dispute resolution.

3. Harsh terms

A lawyer can help you review your term sheet, shareholder and share sale agreement and advise you of any harsh terms. Harsh terms may include:

  • a requirement to wind up your company in the event of a decision deadlock;
  • voting restrictions;
  • unreasonable restrictions on external capital raising;
  • excessive decision making rights for investors that are not proportionate to their investment; and
  • terms that do not align to original discussions, term sheet or MOU.

4. Share registration 

You will need to register the share sale with ASIC and you can find out more about this step here.

Got questions or comments about allocating shares? Leave them below. 

I wish you success in your ventures!

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