Our firm represents many clients in the high-tech and technology fields, from escorting young startups (including as part of special service packages we offer to startups), continuing with representing in the investment in technology companies, continuing to accompanying companies during their operations, and even in the IPO of such companies and accompanying them thereafter. (See the section on Capital Markets and Stock Exchange Regulations.
Steve Jobs, the brilliant mind behind Apple, who founded the company from his parents’ garage, was removed from his position in the company in 1985. In a 2005 speech at the Stanford University, he was quoted saying: “How can you get fired from a company you started?” But Steve Jobs is not alone in the “club” of entrepreneurs who were ousted from a company they started and, sometimes, proper legal drafting can prevent this in advance.
The proper way to set the relationship between company founders and prevent future disputes among them or jeopradizing their rights is by a “founders agreement” that predefines the company’s operation and the parties’ rights therein, or at least articles of association that are duly drafted to that effect. Such a document must be prepared by an attorney with extensive business experience in order to prevent a situation where the agreement will block future investments in the company or where the investor demands, as a prerequisite to its investment, the cancellation of such agreement. It must also anticipate the possibility of a shift in the balance of control in the company and a possible dispute between the entrepreneurs. A possible scenario for a shift in control, detrimental to the founder, may include fraud by one of the other founders, a situation where one of the founders simply chooses to cease investing time and money in the company or where there is a dispute between the founders, leading to one of them being ousted from the company. A founders agreement must enable proper company management and should contain the matters that parties see as important. For example, capital distribution among the founders may be based on monetary investment, time investment or other demand that each founder must comply with. Drafting of the document must take into account tax considerations, it need be drafted in a manner that does not deter future investors and, above all, it must not, by itself, lead to disputes between the parties due to unclear language. Therefore, it is important that the document be prepared by a lawyer experienced in mergers and acquisitions, becasue saving money at this stage, might cost a great deal in the future.
Accompanying technology companies requires not only a great deal of familiarity with the commercial field, international transactions, corporate law, labor law, mergers and acquisitions, taxation and government Incentives and funding and many other legal areas, but also understanding of technology and extensive experience in setting up startup companies. A person who did not set up a startup company himself, did not sit on the board of directors of such a company, did not open by himself a tax file, did not deal with employees and did not see for himself what happens when things are less than working and reaching a legal dispute, can not duly advise a startup or technology company or an investor who wants to invest in such a company.
Our team of experts consists of people who “live” in the field for many years and know how to give companies and investors great added value and not just a legal advise.