Pre Incorporation Contract Template
A pre-incorporation contract template is an agreement that outlines the terms and conditions agreed upon by the founders of a company before incorporation. This template is essential as it helps to prevent disputes that may arise in the future by clearly stating the expectations and duties of each founder. In this article, we will discuss the importance of a pre-incorporation contract template and what it should contain.
Why is a pre-incorporation contract template important?
A pre-incorporation contract template is important for several reasons. Firstly, it helps to prevent misunderstandings and potential legal disputes between founders. A pre-incorporation contract template outlines expectations, obligations, and financial contributions of each founder, thereby reducing the likelihood of conflicts in the future. It also helps to protect the interests of minority shareholders.
Secondly, a pre-incorporation contract template helps to establish a clear understanding of the vision and goals of the company. This template enables the founders to define the company`s objectives and the roles each founder will play in achieving them. This clarity helps to prevent confusion and ensures that all parties are working towards the same goal.
What should a pre-incorporation contract template contain?
A pre-incorporation contract template should address the following issues:
1. Business objectives and vision: This section should outline the purpose of the company and its long-term goals.
2. Roles and responsibilities: This section should define the roles and responsibilities of each founder. It should also state the time commitment required from each founder and the consequences for failing to meet these obligations.
3. Contributions: This section should outline the financial and non-financial contributions each founder will make towards the company. It should also state the ownership percentage that each founder will receive in exchange for these contributions.
4. Voting rights: This section should outline the decision-making process in the company. It should state the voting rights of each founder, the quorum required for decision-making, and the procedures for resolving disputes.
5. Restrictive covenants: This section should outline any restrictions on the founders` ability to engage in competing activities during and after their involvement with the company.
6. Intellectual property: This section should address the ownership and use of any intellectual property created or used by the company.
7. Termination: This section should outline the procedures for terminating the pre-incorporation agreement in the event of a breach or disagreement between the founders.
Conclusion
In conclusion, a pre-incorporation contract template is a critical document that should be prepared before the incorporation of a company. It serves as a guideline for the founders and helps to prevent potential disputes by outlining the expectations and duties of each founder. By including the issues discussed above, a pre-incorporation contract template can help to establish a clear understanding of the company`s vision, goals, and operations.
