Shareholder's Agreement: Each Partner's Role in the Business
Let's start the discussion of the shareholders' agreement with the most important question: what is the role of each partner in the project?
Examples of roles:
Founder
Founder - the incorporator of the company, often serving as the CEO or another key executive, responsible for overall management and strategic development of the business.
In practice, a company may have multiple founders. Often, one focuses on developing the idea from a technical and/or product perspective, while the other handles administrative tasks such as hiring employees, interacting with the legal team, finding investors, and so on.
The most irrational thing to do at the start is to split shares between partners 50/50 without clearly defining roles and areas of responsibility. In case of conflict, the company will not be able to move forward and will get stuck in decision-making by shareholder meetings.
- It is also important to enter into a shareholders' agreement before attracting investments. This allows investors to see that you are at a mature stage, have done preparatory work, and have already agreed on key aspects of collaboration with partners.
Investor
Investor contributes capital for business development, may participate in strategic decision-making, but often does not engage in day-to-day management of the company.
Additionally, there are investors with expertise who, besides financial support, bring their knowledge and experience to the company, assist in strategic planning and development, and can act as mentors for the team.
- It is important to provide the investor with access and decision-making opportunities only in the areas that interest them, to avoid complicating the company's normal workflow while protecting their interests.
Company employees
Company employees who have exercised their stock options and own a small stake in the company usually do not actively participate in operational management. Often, shares issued to key employees through options are non-voting or phantom shares. However, employee shareholders may sometimes make suggestions and participate in votes on important matters.
- It is important to specify in the shareholders' agreement the extent of their involvement in decision-making and access to information.
Mentor
Mentor - a person with expertise in the product or connections in the company's field of activity, who, upon achieving certain metrics, is entitled to a share in the company. This role somewhat overlaps with that of an employee with stock options, but the difference lies in the fact that mentors often do not seek payment for their work, receiving only stock options for their contribution to business development.
| Defining the roles of each partner or potential partner (in the case of employees and mentors) will help establish clear rules for partners in joint activities, prevent corporate conflicts, and focus each partner's actions on their area of responsibility with clear motivation. |
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