Basic legal documents for your business

When starting your own business, you will need some basic legal documents to ensure your business runs effectively and to protect yourself from any disputes which may arise as your business grows.

In this Guide, we have compiled a list of the legal documents and contracts that most start-up businesses will need at some point in the start-up life cycle.

Please be beware that the legal aspects of your business will depend on what kind of business you are running and its specifics.

 

Constitution 

 

Any Private Company Limited by Shares (LTD), otherwise known as a Limited Company, set up in Ireland requires a Constitution to be incorporated at the Companies Registration Office (CRO).

The Constitution (formally known as a Memorandum and Articles of Association) is  a formal document setting out the rules and regulations of how the company is be internally governed, and how it will conduct its business activities.

The Constitution also sets out the rights of various stakeholders of the company, including its directors and shareholders.

It is a binding agreement between them.

The Constitution must be provided to the CRO with the new company application.

It may be a standard one-page document that takes in the Companies Act 2014 in its entirety, without amendment.

You can find our template for this here

Alternatively, you may adopt a tailor-made Constitution that is reflective of the business of the company.

We have outlined the types of clauses that may be inserted or altered to make your Constitution more functional for your specific company.

Regarding Directors:

• The powers and duties of directors
• The number of directors admitted on the board at any given time
• The number of meetings to be held within each calendar year
• The process for resigning or appointing directors
• The amount of time each director may serve on the board
• The role of alternate directors
• The quorum of directors

Regarding Shares:

• Outlining the authorised share capital
• Whether the share capital can be increased or decreased
• The division of the share capital into shares
• The classes of shares that the company possesses
• The number of shares appointed to each investor
• The length of time it will take to register a new share holder
• How the company might issue share certificates
• Share rights in respect of dividends
• Pre-emptive rights, if any
• Share voting rights

Regarding Company Finances:

• Shareholder Loans – how the company might issue loans to third parties
• Repayment of investment – the terms of repayment of shareholder investments
• Dividends – how dividends are paid out to shareholders
• Conflicts of interest and how to respond accordingly

The Constitution of a company is there to provide security and clarity when common issues arise.

The more detail and thought that is placed into the document, the more structure it provides in times of change.

Any company formation agent should be able to assist you in this process.

 

Terms & Conditions and Privacy Policy

 

If you are planning to start a business, you are likely to need a website.

The most common legal documents required for a website are Terms and Conditions and a Privacy Policy.

Terms and Conditions are also used if your business is supplying any goods or services and they differ accordingly.

Website terms and conditions

These differ slightly from standard terms and conditions in that there are some legal requirements you must comply with when marketing or selling goods online.

These include providing information about who you are and your contact information, company registration number, your prices, and your policy on refunds if you are selling goods online must comply with the distance selling regulations.

We have a suite of Website Terms and Conditions for you to choose from depending on who you are selling to (B2B or B2C) and what you are selling

You can find these in our Website Hub 

Standard Terms and Conditions

Standard terms and conditions form the legal basis on which you are willing to do business with your potential customers.

Written terms and conditions create certainty as to the agreement between the parties and form the basis of a contract between you and your customer or client in the absence of a bespoke contract.

They also help minimize cause for legal disputes by providing clarity on your company’s position on the following:

• Definitions of all the goods and/or scope of services that your business is providing
• Specification of the payment methods and terms (in other words, how exactly the customers are going to be charged, what for, how often, etc.)
• All the legal aspects such as guarantees, warranties, jurisdiction, intellectual property, third party rights.
• Timing of the whole agreement and what notice is required to terminate it.

Terms and conditions have an important role to play when it comes to two parties understanding their duties, rights, roles and responsibilities.

We have a suite of terms and conditions for you to choose from.

You can find these in our Terms and Conditions Hub

Privacy Policy

This is a legal document that is needed specifically if you are collecting any personal information from your customers.

Personal information is any information that could be used to identify an individual (such as name, email, phone number, address, credit card number, etc.)

Every website should specify the information it collects, in particular:

• Personal information and the nature of the information collected;
• How this information is used, stored and kept secure by the website/business;
• How the information is disclosed or shared with third parties;
• Policies for deleting data and maintaining accurate data;
• Cookies (most websites use cookies; these are files web browsers place on a computer’s hard drive. They are used to help web providers authenticate clients and provide timesaving shortcuts and preferences.) There are different types of cookies – for some you must obtain user’s express consent to use cookies on your site.

We’ve got you covered here also

Website Privacy Policy

Cookies Policy

 

Intellectual Property Assignment Agreement

 

The assignment of intellectual property (IP) basically transfers rights and ownership of relevant IP from one person to another.

This is particularly important to avoid any legal consequences when an individual (such as an employee or founder) created intellectual property before becoming a part of the company.

An IP assignment agreement transfers any rights in or to the IP created by the individual to the company, and can be applied to any IP including trademarks, patents, logos, designs, or any other IP.

A typical IP Assignment agreement should include:

• Clear definitions of the parties and the intellectual property that is being assigned.
• Warranties (such as whether the person assigning the IP is aware of any infringements and that it is their original work etc.)
• Assurance (from the person assigning the IP that the assigned rights will remain within the company)
• Waiver (to ensure that the agreement remains in place in case of any failures or delays).

Check out our guide on protecting your Intellectual Property

 

Non-Disclosure Agreement (NDA)

 

This agreement protects any confidential information of your business, including IP and other company information which you may not want to be shared, copied or made public.

An NDA is highly recommended before sharing any sensitive or confidential information with external parties, from prospective co-founders to suppliers and investors, and particularly if you intend to have any collaboration with another company.

What is included in an NDA will vary according to the nature and the amount of the information that is being shared, the intended relationship between the parties and the purpose for sharing the information.

In addition to normal ‘boiler plate’ contract clauses, an NDA should specify:

• the obligations of confidentiality and the type of information to be kept confidential; and
• any permitted disclosures (such as any information already in the public domain or anything required to be disclosed by law); and
• A term for the obligations.

We have a suite of templates to help you

Non-Disclosure Agreement – one way

Non-Disclosure Agreement – mutual

Non-Disclosure Agreement – Consultant/ Contractor

To find out more about non-disclosure agreements read our guide on when you should consider having a non-disclosure agreement

 

Partnership Agreement

 

A Partnership agreement relates to two or more individuals intending to form a partnership (rather than a company limited by shares or guarantee).

Sometimes known as a Partnership Contract, Articles of Partnership, or a Founders Agreement, the purpose of a partnership agreement is to have on record details of how the partners intend to run the business and share profits, assets and costs, and to set out the responsibilities and contributions of each partner.

Regardless of the degree of trust between the co-founders, an agreement should be put in place from the outset.

A Partnership Agreement should detail:

• Profit and loss distribution (this will outline any initial financial contributions from each partner, and how profits and or losses will be shared between partners).
• Decision making methods and voting rights
• Roles and Responsibilities (time and commitment by each partner should be clearly identified).
• Withdrawals and dissolutions (the partners should be clear on the procedure for if one partner decides to leave, retires, or the other partners want to remove a partner? How will profits then be divided after the outgoing partner has left?)

Here’s our Partnership Agreement

 

Shareholders Agreement

 

If you have started a private limited company and you are bringing on a co-founder, you will probably be giving shares in the company as part of the co-founder relationship and will therefore need a shareholder’s agreement, particularly before you obtain any external investment.

A shareholder’s agreement differs from a partnership agreement mainly because the consideration is actual company shares or stock options and therefore the relationship is structured differently, although the principles behind the agreement such as decision making remain the same.

The agreement can be very simple or more extensive and complex depending on what has been agreed and the stage of the company’s life cycle, but it will often include:

• Number and type of shares – there are various types of shares that can be issued
• Rights and obligations of each shareholder
• Vesting terms – Sometimes founders agree that the incoming shareholder won’t receive their shares immediately but they will ‘earn’ them over time or after certain milestones (i.e. so that they commit to a certain amount of time or achievement with the business). These are known as vesting terms.
• Exit – if your business partner decides to leave, you might want to have the preferential right to buy their shares. You will therefore need to agree how the price will be decided.

A shareholder’s agreement can be a very useful tool in avoiding and managing and can include provisions setting out a mechanism for the parties to resolve disputes without needing draconian measures such as dissolving the company.

You’ll find our guide on Shareholder’s Agreements useful

And we’ve also got a great Shareholder’s Agreement  for you to use

If you don’t want to use a Shareholders Agreement you can consider a Co-Founders Agreement instead.

You can find out more with our guide to co-founders agreements 

 

Service Agreements

 

If your business is at the stage where you are hiring employees or contractors and freelancers, you will need to have employment or service contracts for each individual employee, which will specify duties and obligations of both your business as an employer and the employees you are hiring.

Generally, an employment agreement will specify:

• Dates of commencement and end of the employment or the contract.
• The exact job title and duties of the employee
• Working days and hours (should also consider specifying public holidays and agreed vacations)
• Salary and benefits (should also include the procedure for when expenses are incurred)
• Depending on the nature of work being provided, confidentiality of information, intellectual property, etc.
• Vesting schedules for shares – you may wish to incentivise your employees with shares after a certain amount of time with the business, in which case you would need to set this out in your agreement with them.

If you are hiring a freelancer or contractor, they will not have the same rights and obligations as an employee.

However it is important to have an agreement in place to specify how the relationship will work.

In particular, this agreement should specify:

• Payment and invoicing
• Any specific deliverables or time commitment you are expecting from the contractor
• Tax – the contractor will be responsible for their own tax obligations
  That the contractor is not an employee of your business.

Check out our guide on employment contract or something else

 

Employment Contract

 

As your company grows, so will the number of your employees and it is important that the employment terms are documented in a written agreement.

The Terms of Employment (Information) Act 1994 provides that all employers must provide an employee with a written statement of the main terms and conditions of employment within two months of the date of commencement of employment.

The written statement must contain, at a minimum, the following information:

• The names and addresses of the employer and employee
• Place of work
• Job title and nature of work
• Commencement date, duration and probationary period
• Remuneration
• Notice
• Working hours and rest periods
• Annual leave and public holiday entitlements
• Protected leave entitlements
• Paid leave
• Incapacity for work/sickness/sick pay (if any)
• Pension and pension schemes
• Relevant collective agreements
• Grievance and disciplinary procedures.

Where a particular employee will be developing IP as part of their role, it is important to include clauses regarding confidentiality and the ownership of IP to ensure that all such IP is owned by the company and to ensure that the company’s confidential information remains confidential.

Where suitable, non-complete and non-solicitation provisions can be included in the employment agreement to protect the company’s interests once an employee has left the company.

We have a suite of employment contracts for you to choose from

5 day statement of employment

Standard contract of employment – (Full-time and Part-time)

Fixed term contract of employment

Directors Service Agreement

To find out more read our guide to employment contracts

 

Letter of Appointment of Non-Executive Director

 

A company may wish to appoint a non-executive director to its board of directors.

A non-executive director is an independent person who is not employed by the company or generally involved in its day-to-day business but rather can offer expertise and guidance to directors in respect of particular areas.

A non-executive director will generally be contracted to dedicate a number of hours per week/month to the company, to include attendance at board meetings, the annual general meeting of the company and site visits to the company during the term of the agreement.

To protect the interests of the company and its business the non-executive director may be the subject of non-compete and non-solicitation restrictions during and following his tenure as a director of the company.

 

Informal Agreements and Arrangements

 

It is an important and prudent practice to document in writing all agreements and arrangements to which a company is entering and this is a habit that should be started at the outset.

This is particularly important in respect of IP that is being developed by persons who are not already subject to an agreement that documents the ownership of developed IP (e.g. under an employment agreement or consultancy agreement with the company).

Also, the payment terms for any services should be documented carefully – avoid the promise of a stake in the company to collaborators and service providers, even if this may be tempting in early stages when finances may be tight.