Startup shareholders' agreement: legal checklist

Note: V1 LexUp draft pending review. Indicative, not personalized advice.

The shareholders' agreement (SHA) is the contract governing the relationship between a company's shareholders, complementing the articles of association. The articles define what the company can do; the SHA defines what shareholders owe each other.

For a startup, the SHA is typically signed at the first fundraising round, or earlier if multiple co-founders want to frame their relationship before investors arrive. Here are the clauses that really matter.

1. Founder vesting

No vesting, no clean fundraising. Vesting forces each founder to "earn" their shares over time: market standard in Switzerland for startups is 4 years with 1-year cliff (nothing acquired before 12 months, then monthly accrual).

The point: if a founder leaves after 6 months, they don't fly off with 25% of the cap. Unvested shares return to the company (or remaining founders), ready to be re-allocated or re-issued.

Critical variable: what happens in a bad-leaver scenario (gross misconduct, leaving to a competitor)? Often, vested shares are bought back at par value (so essentially zero) instead of fair market value. Discuss this upfront, not after the clash.

2. Transfer restrictions (ROFR / drag / tag)

Three mechanisms preventing cap-table surprises:

• ROFR (Right of First Refusal): if a shareholder wants to sell, others have the right to buy at the same terms before they exit. Prevents unwanted investors from sneaking in.
• Tag-along: if a majority shareholder sells, minorities can join the sale at the same terms. Protects founders/employees in case of strategic majority sale.
• Drag-along: if a majority (typically 75% of capital) accepts an exit offer, they can force minorities to sell too. Critical for clean exit, an acquirer doesn't want to inherit a holdout minority.

3. Information rights

The SHA sets what shareholders receive and when: monthly or quarterly financial reporting, access to audited accounts, participation in extraordinary meetings.

For VCs, non-negotiable. For business angels, often calibrated (semi-annual reports may suffice). For a solo founder taking on a friendly co-investor, you can lighten.

4. Reserved matters / veto

Decisions requiring investor (or supermajority) approval beyond simple majority:

• Articles modification
• Capital increase or reduction
• Dividend distribution
• Sale of the company or a division
• Indebtedness above a threshold
• C-suite hiring/firing
• Annual budget approval

Typical list, but calibrate: too many vetoes and the company becomes unmanageable; too few and the investor has no protection.

5. Anti-dilution

If a future round prices below the previous one ("down round"), prior investors get diluted beyond the reasonable. Anti-dilution = mechanism giving them more shares to compensate.

Two variants:

• Full-ratchet: very investor-protective, dilutive to founders. Rare in Switzerland for early stage.
• Weighted-average broad-based: market standard. Reasonable compromise.

6. Exit clauses

How and when to trigger a sale:

• Forced exit: if no exit has occurred after X years (5-7 typical), investors can force a sale process.
• Liquidation preference: in an exit, investors recover their investment before founders. 1x non-participating is market standard in Switzerland for Series A.

7. Non-compete / non-solicit

Founder commitment not to create a competing company or poach employees during and after their departure. Typical duration: 12 to 24 months post-departure.

Note: Swiss case law is strict on overly broad non-compete clauses. Specify the geographic scope and concrete competing activity.

Common founder mistakes

1. Signing a template found online without adapting to Swiss specifics. US or UK SHAs have legal subtleties that don't translate directly into Swiss law.
2. Neglecting vesting between co-founders at the start, on mutual trust. When one co-founder leaves after a year with 30% of the cap table unvested, the next round blows up.
3. Accepting a drag-along threshold too low (50% for example) letting a single investor force a sale.
4. Underestimating reserved matters and giving veto on routine operational decisions.
5. No thought on liquidation preference from the founder side, accepting "1x" without understanding that "participating" nearly doubles the effect.

---

Structuring your SHA? Book a call, we review the critical clauses for your case, no commitment.