Startup Estonia and nine EstVCA member law firms have created a set of free model legal documents to simplify the startup’s journey. The package includes 22 documents and forms, most needed for startups and investors.
There are plenty of examples of use cases for the model documents. When starting a company, it is important to sign a Founders Agreement to determine the roles of the founders, how much of the company each founder owns, and what happens if a founder departs the company. The Articles of Association regulate how important decisions are made and how the shares can be sold. Every investment in a startup starts with a term sheet and ends with an investment agreement. Startup Estonia’s package includes term sheets and final investment documents both for convertible loans and equity investments in the seed round. Every startup must maintain a Cap table showing the ownership percentage of each shareholder and option holder. As the company grows, it signs Employment Agreements and Option Agreements with its employees. IP Assignment Agreements guarantee that all the IP created for the company remains with the company and Non-Disclosure Agreements protect the company’s trade secrets.
The model documents were first created in 2017 and are now updated. Antti Perli, counsel at Ellex Raidla, who led the working group preparing the documents, comments on the updates: ‘’We added comments to all of the resources, which should help with more complicated terms and should ease the process of decision making to startups. For example, we added a Cap table, allowing entrepreneurs to test the allocation shares between founders, employees and investors while raising new investments. Investment documents are now built to also be used in A-rounds, additionally to seed rounds.’’