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Founders Stock Agreement for Malaysia

Founders Stock Agreement Template for Malaysia

A Founders Stock Agreement under Malaysian law is a legally binding document that establishes the terms and conditions governing the ownership, distribution, and management of shares among company founders. This agreement, compliant with the Companies Act 2016 and other relevant Malaysian legislation, outlines crucial aspects such as share vesting schedules, transfer restrictions, founder obligations, and exit provisions. It serves as a fundamental document in protecting founders' interests while ensuring clear governance structure and dispute resolution mechanisms in accordance with Malaysian corporate law requirements.

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What is a Founders Stock Agreement?

The Founders Stock Agreement is a crucial document used during company formation in Malaysia when two or more founders establish a new business venture. This agreement is essential for clearly defining the equity structure, rights, and obligations of founding members, ensuring compliance with Malaysian corporate law, particularly the Companies Act 2016. It typically includes provisions for share vesting, transfer restrictions, intellectual property assignment, and founder commitments. The document becomes particularly important when seeking investment, during ownership disputes, or when founders exit the company. It provides necessary protection for all parties involved and establishes a clear framework for company governance and decision-making processes.

What sections should be included in a Founders Stock Agreement?

1. Parties: Identification of all founding shareholders and the company

2. Background: Context of the agreement, including company formation details and purpose

3. Definitions: Key terms used throughout the agreement

4. Share Allocation: Details of initial share distribution among founders

5. Consideration: What each founder contributes in exchange for shares

6. Vesting Provisions: Timeline and conditions for share vesting

7. Transfer Restrictions: Limitations on selling or transferring shares

8. Right of First Refusal: Process for offering shares to other founders before external sale

9. Drag-Along and Tag-Along Rights: Rights in case of company sale or major share transfers

10. Founder Commitments: Time commitment, roles, and responsibilities of founders

11. Intellectual Property Assignment: Assignment of IP rights to the company

12. Confidentiality: Protection of company and founder confidential information

13. Non-Competition and Non-Solicitation: Restrictions on competing activities and poaching

14. Termination: Circumstances and process for agreement termination

15. Dispute Resolution: Process for resolving conflicts between founders

16. Governing Law: Specification of Malaysian law as governing law

What sections are optional to include in a Founders Stock Agreement?

1. Death and Incapacity: Procedures for handling shares in case of founder death or incapacity

2. Fair Value Determination: Method for valuing shares in various transfer scenarios

3. Anti-Dilution Protection: Protection against share dilution in future funding rounds

4. Board Representation: Rights of founders to board seats and voting arrangements

5. Founder Loans: Terms for any loans made by founders to the company

6. Good Leaver/Bad Leaver Provisions: Different treatment of shares based on circumstances of founder departure

7. Deadlock Resolution: Additional mechanisms for resolving serious disagreements

8. Future Funding Provisions: Arrangements for future investment rounds

What schedules should be included in a Founders Stock Agreement?

1. Schedule 1: Share Capital Table: Detailed breakdown of share ownership and classes

2. Schedule 2: Company Information: Details of company registration, address, and business

3. Schedule 3: Founder Information: Detailed information about each founder

4. Schedule 4: Vesting Schedule: Detailed timeline and conditions for share vesting

5. Schedule 5: Initial Business Plan: Overview of company's initial business objectives

6. Schedule 6: IP Schedule: List of intellectual property being assigned to the company

7. Appendix A: Share Transfer Notice: Template for notice of intention to transfer shares

8. Appendix B: Deed of Adherence: Template for new shareholders to join the agreement

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Malaysia

Publisher

Ƶ

Cost

Free to use
Relevant legal definitions



































Clauses


































Relevant Industries

Technology

E-commerce

Financial Services

Healthcare

Manufacturing

Professional Services

Real Estate

Consumer Goods

Education

Clean Energy

Biotechnology

Agriculture

Digital Media

Software Development

Consulting

Relevant Teams

Legal

Executive Leadership

Corporate Governance

Administration

Finance

Board of Directors

Company Secretariat

Compliance

Corporate Affairs

Relevant Roles

Founder

Co-founder

Chief Executive Officer

Chief Technology Officer

Chief Financial Officer

Chief Operating Officer

Company Secretary

Corporate Lawyer

Legal Counsel

Managing Director

Board Member

Director of Operations

Head of Legal

Startup Advisor

Business Development Director

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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