Founders' agreement and articles: authority and shareholder relations

The articles are the company's constitutional document within the Companies Law; a founders' or shareholder agreement is a contract among its parties. They may regulate overlapping subjects, but their status, amendment and effect on the company and others differ.

Choosing to place a mechanism in only one document should be deliberate: confidentiality, enforceability, flexibility and any applicable registration or reporting duty may point in different directions. Not every contractual undertaking is registered with the Companies Registrar.

• Capital, allotments and dilution
• Transfers, pre-emption, tag and drag rights
• Board, signatories and reserved decisions
• Work, intellectual property and confidentiality
• Deadlock, departure, sale and dispute resolution

Ask how the system works when an investor joins, a founder stops working, funding is needed, an acquisition is offered or deadlock develops. A mechanism that looks balanced at formation may create an unintended veto or forced sale.

After signature, complete the required resolutions, allotments, company-register updates and filings as applicable. A mismatch among the agreement, corporate acts and relevant registers may create evidentiary or operational difficulty.