Founders Law LLC’s Post

Getting back to the basics - does your LLC have an Operating Agreement in place? Read from my colleague Hind Abdelaziz why you should! #startup #founders #fundraising #founderslaw #startuplaw #LLC #entrepreneur #Founder

If you know me personally, you know that I'm passionate about the subject of operating agreements. Clarity between members of an LLC is essential at the outset of formation, yet few LLCs take the time to spell everything out. Here's my article, fresh off the press! #startup #venturecapital #technology #founders #earlystage #entrepreneur #founderslaw #Founders

ARE TERM SHEETS NECESSARY? A term sheet is a document that includes salient terms and conditions of a business deal. A term sheet is a frame or template on which a subsequent binding contract or agreement is premised on. Term sheets are extremely helpful and beneficial for parties especially in complex or highly technical contracts. Term sheets are usually issued by angel investors, Venture Capitalists, Financial Institutions or in M&A deals, complex land sale/swap deals or property development contracts. Although on the face of it, a term sheet is not legally binding (unless parties expressly agree for it to be so), it does set out the intention of parties and the direction of negotiations which is a pivotal part of contract negotiation.  In the event of subsequent litigation and in terms of narrative, it will be easier for a court of law to determine the direction of the contracting parties. Here are five important reasons why term sheets are essential before you embark on drafting a contract: 1.     Term sheets help all parties involved in the negotiation to gain a clear understanding of the proposed terms and conditions. This ensures that everyone is on the same page and minimizes misunderstandings and disputes during the contract drafting process. 2.     They expedite the contract negotiation process by allowing parties to focus on key issues upfront. This can save time and resources by avoiding the need to draft and revise the entire contract multiple times. 3.     Term sheets provide a degree of flexibility. Parties can explore and agree on various terms and conditions without committing to the full contract. This flexibility can be especially important when the negotiations are complex or involve multiple parties. 4.     They allow parties to identify and address potential risks early in the negotiation process. This can include provisions related to dispute resolution, indemnification, and termination clauses, helping to minimize the chances of disputes later on. 5.     Term sheets serve as a roadmap for the subsequent contract drafting. By outlining the key terms, parties can engage legal counsel and other experts to ensure that the contract is legally sound and compliant with relevant laws and regulations. 6.     Term sheets are pivotal in maintaining balance between contracting parties and their intentions. A term sheet that is bias towards one contracting party could give rise to legal risks and consequences. PRO TIP- always remember to have well drafted confidentiality and non-disclosure clauses in your term sheet to ensure that sensitive business and financial information are protected, to preserve negotiating leverage and to facilitate due diligence.

A long time ago, shortly after the closing of a messy deal, I get a call from a client. He isn't happy. One of my investors says that the waterfall provisions don’t work, he says. I’m sure he’s wrong, but can you check it? We are not talking pennies, by the way. Waterfall provisions often deal with cash distribution arrangements at the end of a venture. They are notoriously complex and the mere mention of "waterfall" in a legal context is almost enough to make me produce one of my own, so I don’t even look at it. I speak to the lawyer who worked on the document. Oh, he says. The waterfall? There is a silence. I never really understood that clause, he says, finally. Although I am uncharacteristically quiet, my face is speaking louder than any words. I know, he says, but it got so complicated by the end that I didn't understand it anymore. And I thought it was OK, he says, because everyone else seemed to understand it. Even now, after years have passed, I am floored by this sentence. Predictably, the drafting is indeed wrong. But it gets sorted without fuss because the client on the other side is decent and not looking to pull a fast one, even though their lawyers appear to have done just that. But that's not the story here. The real story is the risk you take when your need to save your face is stronger than your need to save your deal. Here, one lawyer was able to cross the line because another was crossing their fingers. And I wish that I could tell you that this was an isolated incident. I saw it all the time and I don't mean just with lawyers. And most often with juniors, frightened to expose gaps in their understanding. I get it. There's something deeply exposing about putting your hand up to say you don't understand, when everyone else is racing along. But you must. However embarrassing. Better to open your mouth before it's too late and risk looking stupid than wait till after, when there will be no doubt. Doesn't mean you are stupid. Or weak. Or inadequate. Or difficult. And even if it does, it's still better than winging it. If you can't admit when you're out of your depth, there's a good chance you'll end up drowning. Not knowing: forgivable. Not asking: unforgivable. #lawyerstories #lawyerlife #realestate #officenightmares

How often do you read all the terms of a contract ? I do but so many don’t and we help where we can to get them out of them. I’m doing so we are so many poorly written terms and conditions that have been pieced together. Contracts are the backbone of business transactions, serving as a legal agreement between parties. Here's why you should always take the time to read them: 1️⃣ Understanding the Terms: Contracts outline the rights, obligations, and responsibilities of all parties involved. By reading them carefully, you gain a clear understanding of what is expected from each party, preventing any misunderstandings or surprises down the line. 2️⃣ Protecting Your Interests: Contracts are designed to protect your interests and limit potential risks. By reading and comprehending the terms, you can identify any unfair clauses, negotiate changes, or seek legal advice before signing. This ensures you're not caught off guard by unfavorable conditions. 3️⃣ Avoiding Legal Disputes: Reading contracts minimizes the risk of future disagreements. When you're aware of the terms and conditions, you can proactively address potential conflicts, clarify ambiguities, and establish a solid foundation for a mutually beneficial relationship. 4️⃣ Financial Implications: Contracts often involve financial aspects such as payment terms, penalties, or termination clauses. By carefully reviewing these details, you can ensure that you're aware of the financial implications, avoid unexpected costs, and protect your bottom line. Remember, contracts are legally binding documents, and your signature signifies your agreement to the terms within. Taking the time to read and understand them can save you from future headaches and protect your professional interests. So, next time you encounter a contract, don't rush. Take a deep dive into its contents, ask questions, and seek professional advice if needed. It's an investment in your own success and peace of mind! 📜💪 We can write or review for you and by being a retainer client you qualify for a reduced hourly rate and also means we can get to know you better. #ContractsMatter #business #ProfessionalAdvice #law #startups

💡💼 Start-up, Co-founder agreement: Key Components, Decision-Making 💼💡 A co-founder agreement is a legal contract that outlines the terms of a business partnership when starting a start-up with a co-founder. It is essential to have a co-founder agreement to avoid issues, provide legal protection, define roles and responsibilities, and establish a transparent financial framework. The key components of a co-founder agreement typically include:   1. Names of Founders and Start-ups: List all founders' and the start-up’s names.   2. Start-up Description: Include a brief overview of the start-up’s plans and goals.   3. Ownership Structure: Define the percentage of ownership for each co-founder, which is directly tied to how much equity each co-founder received at the beginning.   4. Capital Contributions: Detail the financial commitments of each co-founder, Deed in case of LLP, and MOA(memorandum of association) in case of a company.   5. Decision-Making Processes: Outline how major decisions are made, including dispute resolution mechanisms.   6. Exit Strategy: Discuss what happens in scenarios like selling the company or a co-founder's departure.   7. Conflict Resolution: Disputes with a well-defined mechanism for resolving conflicts, whether through mediation, arbitration, or other means.

“Chapter 11’s Inclusivity Problem”, by Professor Sarah Paterson (LSE Law School) and Professor Adrian Walters (Chicago Kent College of Law). Check out this new article published on the Singapore Global Restructuring Initiative (SGRI) Blog! #restructuring #insolvency #Chapter11 #selective #debts #inclusivity https://lnkd.in/gsqEYr78

One of the most critical errors in a contract negotiation is neglecting to do proper homework. Failing to do the research leaves you helpless, without the necessary insights to accurately assess the value of the deal, its associated risks, potential gains for both parties, and alternative negotiation paths. To avoid this pitfall, it's essential to approach contract negotiations with a prudent and practical mindset. Begin by thoroughly researching not only the terms and conditions of the proposed agreement but also the broader context surrounding it.     NEED FURTHER ASSISTANCE? TALK TO OUR LAWYERS DIRECTLY!    📞 (07) 3189 3000     ✉ jamie@clearmanlawyers.com.au     🌐 www.clearmanlawyers.com.au  #contract #drafting #business #commercial #growth #expansion #protect #experienced #local #contracts #legalcompliance #agreements #brisbane #queensland #businessowners #investor #investment #legalneeds #legal #lawyers #negotiations #entrepreneurs #businessadvise #commercialneeds #trustedpartner #trustedadvisor #partnerships

A term sheet is a document that includes salient terms and conditions of a business deal. A term sheet is a frame or template on which a subsequent binding contract or agreement is premised on. Term sheets are extremely helpful and beneficial for parties especially in complex or highly technical contracts.