When founders start a company together, they usually agree the important points informally: who owns what, who does what and how decisions are made. Months or years later, memories differ, roles change, someone stops contributing or wants to leave, and an investor asks for documents that do not exist. Without written terms, disputes over equity can paralyse the company and put off investors.
A founders' agreement records these arrangements while everyone is on good terms. We prepare founders' agreements tailored to Nigerian law and the company's stage, and support founders on the related legal work that comes with building a company together: bringing in new co-founders and advisers, paying founders, protecting intellectual property, preparing for investment and handling a founder's departure.
What a founders' agreement covers
- Equity split: how shares are allocated between founders, and the reasons for the split
- Vesting: founders earn their shares over time, usually with a cliff, so that a founder who leaves early does not keep a full stake
- Leaver provisions: what happens to a departing founder's shares, distinguishing good leavers from bad leavers
- Roles and responsibilities: titles, time commitment, areas of authority and what happens if a founder cannot continue full time
- Decision-making: matters that need the agreement of all founders, and how deadlock is broken
- Intellectual property: assignment to the company of everything created for the business
- Funding: capital contributions and loans from founders, and how they are repaid or converted
- Confidentiality, non-compete and non-solicitation
- Dispute resolution: escalation, mediation and, if needed, arbitration
Getting the equity split right
There is no correct formula. Equal splits are common, but they can create deadlock and may not reflect real differences in contribution, risk or commitment. We help founders think through the factors that matter, such as the idea and early work, capital, full-time commitment, skills that are hard to replace and future roles, and record the reasoning so that it is not reopened later. We also plan for the future: the size of an employee share option pool and the dilution founders can expect in later fundraising rounds.
Vesting and leaver provisions
Vesting protects the founders who stay. A typical arrangement vests shares over four years with a one-year cliff, but the right terms depend on the company. Under Nigerian law, vesting can be implemented through transfer obligations in the founders' agreement and articles, options for the company or other founders to buy back unvested shares, or shares issued in tranches. The mechanism must be consistent with the Companies and Allied Matters Act 2020 (CAMA 2020) and the company's constitution so that it can actually be enforced if a founder leaves.
We also advise on:
- good and bad leaver definitions and the price paid for a leaver's shares
- acceleration of vesting on a sale of the company, including single and double trigger acceleration
- credit for time already spent on the business before the agreement was signed
Intellectual property
Investors and buyers expect the company to own its technology, brand and content. Code, designs and content created by a founder before or outside an employment relationship may belong to that founder unless they are properly assigned. Under Nigerian law, assignments of copyright must be in writing, and assignments of registered rights such as trademarks and patents should be recorded at the relevant registry. We prepare IP assignments from founders, early contributors and freelancers, and register the company's brand through trademark registration.
Before the company is incorporated
Many founders work together for months before incorporating. A short pre-incorporation agreement can record the equity split, the IP each founder is contributing and what happens if the venture does not proceed. CAMA 2020 allows a company to adopt contracts made on its behalf before incorporation. When the founders are ready, we handle business registration with an investor-ready share structure, and advise on whether a Nigerian company or an offshore holding structure suits the founders' plans.
Bringing in a new co-founder or advisers
Adding a co-founder after the company has started requires new shares or a transfer from existing founders, waivers of pre-emption rights, an updated agreement and filings with the Corporate Affairs Commission. Advisers who receive equity should sign adviser agreements setting out their role, time commitment, vesting and confidentiality. We document both so that the cap table stays clean.
Paying founders and founder service agreements
Founders who work in the business should have written service or employment agreements setting out their role, pay, duties, confidentiality and IP terms. These sit alongside the founders' agreement and become important when investors join, as investors usually expect key founders to be bound by service agreements. We also advise on founder salaries, the tax and pension consequences of paying founders, and founder loans to the company.
If a founder dies or becomes incapacitated
If a founder dies, their shares pass to their personal representatives, who may have no interest in the business. A founders' agreement can give the company or the other founders an option to buy those shares at a fair value, and key person insurance can fund the purchase. We also advise founders on wills and succession for their own shareholdings.
Founders and investors
When the company raises money, the founders' agreement is usually replaced or supplemented by a shareholders' agreement that includes the investors. Investors routinely ask whether founders' shares vest and whether all IP sits in the company, so good founder documents make due diligence faster and support a stronger position on the term sheet. We also advise founders on protecting their own position in investment rounds, including board seats, founder vesting terms and leaver provisions.
When founders fall out
Where founders are already in dispute, we advise on their rights under the existing documents, negotiate exits, buy-outs and restructurings, and use mediation to reach an agreement where possible. Where necessary, our corporate disputes team acts to protect our client's position.
How we help
- advising on the equity split, vesting and leaver terms
- drafting founders' agreements, pre-incorporation agreements and adviser agreements
- IP assignments from founders, employees and contractors
- founder service agreements, pay and founder loans
- bringing in new co-founders and updating the cap table
- aligning the articles of association with the founders' agreement
- negotiating founder exits and resolving founder disputes
We offer fixed fees for founders' agreements and incorporation packages. Our startup lawyers in Lagos and Abuja work with founders across Nigeria. To discuss your founding team, contact us.
