The Co-Founder Separation Agreement is a crucial legal document used when one or more founders decide to part ways with a business they helped establish. This agreement, governed by South African law, becomes necessary when co-founders need to formally separate their interests, responsibilities, and obligations from the company. It typically comes into play during situations such as strategic disagreements, personal circumstances, or when a co-founder pursues other opportunities. The document comprehensively addresses share valuations, transfer mechanisms, intellectual property rights, confidentiality requirements, and non-compete provisions, all while ensuring compliance with South African legal requirements, including the Companies Act, Labor Relations Act, and relevant tax legislation. It serves as a vital tool for managing potential disputes and establishing clear parameters for the separation process while protecting both the departing founder's interests and the company's future operations.
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1. Parties: Identification of all parties to the agreement, including the departing co-founder, remaining co-founders, and the company
2. Background: Context of the co-founder relationship, company formation, and reasons for separation
3. Definitions: Definitions of key terms used throughout the agreement
4. Effective Date: Specifies when the separation becomes effective
5. Resignation and Relinquishment: Details of the co-founder's resignation from all positions and relinquishment of duties
6. Financial Settlement: Terms of financial settlement, including share valuation and payment terms
7. Share Transfer: Provisions governing the transfer of shares owned by the departing co-founder
8. Intellectual Property Rights: Assignment and retention of intellectual property rights
9. Confidentiality: Ongoing obligations regarding confidential information
10. Non-Compete and Non-Solicitation: Restrictions on future competitive activities and solicitation of employees/clients
11. Mutual Release: Release of claims between parties
12. Representations and Warranties: Standard representations and warranties from all parties
13. Governing Law: Specification of South African law as governing law
14. Dispute Resolution: Process for resolving any disputes arising from the agreement
15. General Provisions: Standard boilerplate clauses including severability, entire agreement, and amendments
1. Transition Period: Used when the co-founder needs to assist in transitioning their responsibilities - includes duration and scope of transition assistance
2. Ongoing Consulting Arrangement: Include when the departing co-founder will continue to provide consulting services to the company
3. Board Observation Rights: Required if the departing co-founder retains any shares and is granted board observation rights
4. Tax Indemnification: Include when there are specific tax implications that need to be addressed
5. Insurance and Benefits: Necessary when dealing with ongoing insurance coverage or benefit arrangements
6. Public Announcements: Include for high-profile separations or public companies requiring coordinated communications
7. Return of Company Property: Include when there is significant company property to be returned
8. Future Financing Rights: Include if the departing founder retains any rights related to future funding rounds
9. Earnout Provisions: Used when part of the settlement includes future performance-based payments
1. Schedule A - Share Details: Details of shares held, valuation, and transfer terms
2. Schedule B - Financial Settlement Terms: Detailed breakdown of all financial elements of the settlement
3. Schedule C - Company Property: List of all company property to be returned or retained
4. Schedule D - Intellectual Property: Comprehensive list of IP rights and their disposition
5. Schedule E - Ongoing Obligations: Detailed description of any ongoing obligations or restrictions
6. Appendix 1 - Share Valuation Report: Independent valuation report for share transfer
7. Appendix 2 - Resignation Letters: Forms of resignation from various positions
8. Appendix 3 - Public Announcement: Agreed form of any public announcements regarding the separation
9. Appendix 4 - Transfer Documents: Share transfer forms and other necessary transfer documentation
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