- Hold your first shareholder and directors meetings;
- Pass your initial directors’ resolutions;
- Issue shares (make sure you can lawfully issue shares under a relevant prospectus exemption);
- Enter a Shareholder Subscription Agreement.
- Open a corporate bank account.
Create Shareholder Registers
Why? Because section 141 of the Ontario Business Corporations Act requires you to keep a “securities register”. The securities register records the details of securities issued for the last 6 years.
Create Transfer Ledgers
The Act also requires that you keep a “register of transfers” in which all transfers of securities issued by the corporation are recorded.
The Lean Startup Shareholders’ Agreement
Why? Even successful companies go through tough times (whether financial or otherwise) at some point. The harsh reality is that regardless of whether you are successful or not, co-founders often find themselves in disputes about how the company should be managed, or ownership stakes.
Management issues that often raise difficult issues for co-founders include things like:
- The hiring and firing of employees;
- Purchasing equipment and major assets;
- signing cheques;
- whether to pay dividends (profits) out of the company or reinvest them into the company for growth;
- issuing new share, raising outside investment or offering shares to employees;
- amending the corporate documents (articles of incorporation, by-laws etc.); and
- selecting what corporate opportunities to pursue. Learn More Here
Contract with Employees
Aside from salary and benefits, the employment agreement is essential to address important issues like:
- The employees role/duties within the corporation;
- Ownership of IP developed or brought to the company by the employee;
- Assignment of inventions;
- Non-disclosure of confidential information;
- Non-compete/Non-solicitation terms;
- Duration of the agreement;
- Vacation time;
- Employer office policies (use of computers etc)
- Expense reimbursements;
- Hours of work
You can limit your liability when engaged with independent contractors and set out important terms regarding ownership of work product and intellectual property, non-compete and non-solicitation clauses, wages and benefit (if any).
Stock Option or Incentive Plan
Why? According to one author, 74% of venture backed companies recently survey had and employee stock option program. Issuing shares for services is an appealing way for start-ups, and even larger companies, to attract and retain talent. The Ontario Business Corporations Act also permits directors to issue shares for past services rendered by employees and contractors.
The usual structure for issuing employee stock options in Canada is to have two main documents; an options plan and an option agreement.
Protect your IP
Why? For some companies (particularly tech companies) your intellectual property is your main and in some cases your only asset. Spending the time, effort and money to create an innovative product equally deserves the investment required to protect it. The stories of great products being copied by competitors are numerous. From using a name or trade-mark that is registered by someone else to a competitor patenting the technology first. Don’t be one of them. You can start with registering your trade-mark.
Terms and Conditions
Why? The key functions of your website terms and conditions is to try to reduce your exposure to a lawsuit, attempt to limit your liability in the event of a lawsuit and set the ground rules for how disputes with users will be resolved. Consider these 10 Areas of Potential Liability for website owners.
What is a lean startup? Check out the book, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses