Founder Shareholder Agreement Template for Hong Kong

The Founder Shareholder Agreement is a crucial document used when establishing a new company or formalizing the relationship between existing founders in Hong Kong. It should be implemented at the company's formation or before any significant business operations or external investment commence. This agreement covers essential aspects including equity distribution, decision-making processes, intellectual property rights, non-compete provisions, and exit mechanisms. Under Hong Kong law, while not strictly required by the Companies Ordinance, this agreement provides vital protection for founders and establishes clear governance structures. It serves as a key risk management tool by addressing potential future scenarios such as founder departures, disputes, or company sale, while ensuring compliance with Hong Kong's legal framework for corporate governance.

1. Parties: Identification of all founding shareholders and the company

2. Background: Context of the agreement, including company formation and founders' roles

3. Definitions: Key terms used throughout the agreement

4. Share Ownership and Capital Structure: Details of initial shareholding, share classes, and capital contributions

5. Founders' Commitments and Obligations: Key responsibilities, time commitment, and performance expectations of founders

6. Board Composition and Governance: Structure of the board, appointment rights, and decision-making processes

7. Reserved Matters: Decisions requiring special majority or unanimous consent

8. Share Transfer Restrictions: Limitations on transfer of shares and right of first refusal provisions

9. Good Leaver/Bad Leaver Provisions: Consequences of founder departure under different circumstances

10. Intellectual Property Rights: Assignment and protection of IP created by founders

11. Confidentiality: Protection of company and founder confidential information

12. Non-Competition and Non-Solicitation: Restrictions on competitive activities and hiring

13. Dividend Policy: Framework for profit distribution and reinvestment

14. Dispute Resolution: Procedures for resolving conflicts between founders

15. Termination: Circumstances and procedures for terminating the agreement

16. General Provisions: Standard clauses including governing law, notices, and amendments