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I hope your week started on a Great Note!

Today, we would quickly look at the difference between Co-founder's agreement and shareholders' agreement.

These two terms have been very confusing even for some lawyers.

it is not uncommon to find people using the two words interchangeably.

Technically, they serve the same purpose which is to ensure that everyone is on the same page as per the contents of the Agreement.

However, there is an actual difference between a Co-Founder Agreement and a Shareholder Agreement.

1. A Co-founder Agreement is an Agreement between the Co-founders of a Company.

it regulates how the Co-founders relate with themselves.

A shareholders Agreement on the other hand is an Agreement between the Company and its Shareholders.

The major difference here is in the Parties to the Agreement

In a Shareholders Agreement, the Company is a party to the Contract but in a Co-founder Agreement, only the Co-founders are parties t the Contract.

Another difference between a Co-Founder Agreement and a Shareholders Agreement lies in the timing of the Agreement.

That is, When would you need a Co-founders' Agreement and when would you need a Shareholders' Agreement?

A Co-founder Agreement is needed before the incorporation of the Company.

At this stage, the Company hasn't come into existence so the contract is only between the founders prior to Incorporation of the Company.

On the other hand, You need a Shareholders' Agreement at the point of incorporation or right after incorporation of the Company.

That is when the Company has come into existence as a legal entity.

So if you had a Co-founder Agreement prior to incorporating the Company, after the company is registered, you may need to "upgrade" it to a shareholders Agreement.

Members of the Legal Vault Academy will have my team and I prepare a tailor-made Co-founders Agreement and Shareholders Agreement amidst other documents.

As a startup founder, you can't afford to miss the legal Vault Academy for anything in the world.

Go Here to sign up for the program!

To your #LegalSense

BarinaadaLegal