Founder Exit Agreement

Founder Exit Agreement Template for Canada

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Key Requirements PROMPT example:

"I need a Founder Exit Agreement for an amicable departure where our CTO/co-founder is leaving to start a new venture in March 2025, involving the transfer of 25% shareholding back to the company, with provisions for a 6-month consulting period to ensure smooth technical transition."

Document background

The Founder Exit Agreement is a critical legal document used when a founding member decides to leave or is required to leave a company in Canada. This agreement becomes necessary in various scenarios, including voluntary departures, strategic exits, or resolution of internal disputes. The document must comply with Canadian federal and provincial legislation, including the Canada Business Corporations Act and relevant securities laws. A well-structured Founder Exit Agreement typically includes provisions for share valuation and transfer, payment terms, non-compete clauses, confidentiality obligations, and ongoing responsibilities. It serves to protect both the departing founder's interests and the company's future operations while ensuring a smooth transition of ownership and management responsibilities. The agreement should be customized based on the specific circumstances of the exit, the company's structure, and any existing shareholders' agreements or corporate bylaws.

Suggested Sections

1. Parties: Identification of the departing founder, the company, and other relevant parties (e.g., remaining founders, key shareholders)

2. Background: Context of the founder's role, reason for exit, and current ownership structure

3. Definitions: Key terms used throughout the agreement, including specific corporate, financial, and legal terminology

4. Share Transfer Terms: Details of the share transfer process, including pricing, payment terms, and mechanics of transfer

5. Payment and Consideration: Comprehensive breakdown of all financial terms, including payment schedule, valuation methodology, and any earn-out provisions

6. Resignation and Role Transition: Terms of the founder's resignation from all positions (director, officer, employee) and transition plan

7. Confidentiality Obligations: Ongoing obligations regarding company confidential information and trade secrets

8. Non-Competition and Non-Solicitation: Restrictions on future competitive activities and solicitation of employees/customers

9. Intellectual Property Rights: Confirmation of IP assignment and ongoing obligations regarding company IP

10. Release of Claims: Mutual releases between the parties for past claims and liabilities

11. Tax Matters: Allocation of tax responsibilities and obligations

12. Representations and Warranties: Standard representations by all parties regarding authority, ownership, and compliance

13. General Provisions: Standard boilerplate clauses including governing law, notices, amendment procedures

Optional Sections

1. Consulting Arrangements: Terms of any ongoing consulting relationship with the departing founder

2. Board Observer Rights: If applicable, terms for maintaining board observer status post-exit

3. Earnout Provisions: Detailed terms for performance-based additional payments

4. Founder Life Insurance: Provisions regarding existing key person life insurance policies

5. Investment Rights: Terms for maintaining any future investment rights or pro-rata rights

6. Public Relations: Agreement on public communications regarding the exit

7. Dispute Resolution: Specific dispute resolution procedures beyond standard court proceedings

8. Family Member Provisions: Special provisions if family members hold shares or positions

9. Outstanding Loan Arrangements: Treatment of any loans between founder and company

Suggested Schedules

1. Schedule A - Share Transfer Details: Detailed breakdown of shares being transferred, including class, number, and certificate numbers

2. Schedule B - Payment Schedule: Detailed payment terms, amounts, and timing

3. Schedule C - Resignation Letters: Form of resignation letters from various positions

4. Schedule D - IP Assignment Confirmation: Detailed list of IP being confirmed as assigned to the company

5. Schedule E - Company Assets: List of company assets to be returned by the founder

6. Schedule F - Outstanding Obligations: List of any outstanding obligations or commitments

7. Appendix 1 - Valuation Report: Independent valuation report if applicable

8. Appendix 2 - Tax Election Forms: Required tax forms for the transaction

9. Appendix 3 - Release Documents: Form of mutual release documents

Authors

Alex Denne

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

alex.den.21@genieai.co

Relevant legal definitions

Clauses

Relevant Industries

Technology

Start-ups

Financial Services

Professional Services

Healthcare

E-commerce

Manufacturing

Software Development

Biotechnology

Clean Technology

Digital Media

Consumer Products

Telecommunications

Real Estate

Educational Technology

Relevant Teams

Legal

Executive Leadership

Human Resources

Corporate Governance

Finance

Compliance

Board of Directors

Corporate Development

Operations

Administrative

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer

Chief Technology Officer

Company Founder

Managing Director

Board Member

Corporate Secretary

General Counsel

Legal Director

HR Director

Corporate Development Director

Investment Manager

Compliance Officer

Company Secretary

Executive Director

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