3 Essential Things Needed in a Hong Kong Founders’ Agreement
It is vital for the business’s founders to arrange themselves first before establishing the business. Founders’ agreement in Hong Kong is the outcome of discussions among business’s founding members at the initial stages of its establishment. The main purpose of these discussions is to provide honest and realistic perceptions, concerns, and expectations of the involved parties within the new business. This will assess the probability of unexpected scenarios as the business expands.
The three primary things essential in a founders’ agreement in Hong kong are as follows.
1. Roles and Responsibilities
Co-founders want to make sure that they have the exact knowledge about their roles and responsibilities. It is critical that a co-founding team establish new and shared cultural values among themselves. However, it doesn’t immediately imply that all members are in charge of almost everything. Many startup companies often make a mistake when they think that every founding member’s opinions should be considered and that almost everyone has control over everything. Such a mentality will create chaos and misunderstanding.
Considerably, not all co-founding members should be co-CEO. Business organizations should establish a few strict boundaries of primary responsibilities. Doing so will enable the operational platform levels that support each of the founding members to have specific roles and obligations. It will take a long way to aid businesses in minimizing developmental setbacks.
2. Equities Ownership and Vesting
Although this is a subjective issue and sometimes quite sensitive, founders must pin down how they should decide to split up the working equity between the co-founding members upfront. This is to ensure that they are no misconceptions or emotional distress even before things get established.
Bear in mind that there is no such rule stating that all of the co-founding members will have the same ownership rights. One co-founder may address other co-founding members, not their co-equal. However, it is often best since day one to have a conversation clearing all misunderstandings and not consider moving forward at all for a business venture than to get stuck as to who does each one own.
Know that people in businesses do not just do the founder’s agreement because people expect the company to split up. They do this because when one of the co-founding team members picks up and drops everything, you are obligated to use fully diluted equity to bring up replacements and start creating extremely major business risks.
Be wise, then. Nail and pin early conversations on equity ownership then implement suitable terms of vesting right upfront.
3. Assignment of Intellectual Property
Businesspersons construct intellectual property (IP) among co-founders to begin validating a concept and creating a business strategy or building a brand or website.
IP exists in a range of contexts. Therefore, try to ensure that whatever IP has been established for your new business venture belongs to an entity, not to the persons behind the IP.
The whole development of the idea extends to all business members, contractors, and consultants, not just your co-founding members.
It is easy to have an IP designated to the business, and there are many methods publicly available on the internet to achieve this specific task. Implement it on the first day, and do not leave it too late.
A Business-friendly Note
Co-founding a business is not too significantly different from marriage. For all of the best intentions, you could even begin and never think of separating. But it tends to happen.
Plan accordingly; otherwise, you’ll risk the feasibility of the new business. The best way to do that is to employ a Hong Kong Incorporation Package. You can avail one by contacting 3E Accounting Hong Kong. They’ll be offering incorporation service packages, so there’ll be no need for you to worry about your founders’ agreement.