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Voting Agreement Between Founders

voting agreement between foundersI am about to co-found a company with someone i know professionally. We agreed on an intial 2:1 distribution of shares with him getting approx. 66.66% and me 33.33%. In this case he would have already the majority in early decicions. However he want me to sign a voting agreement which is very restrictive (I HAVE to vote same as him and i CAN'T sell my shares if not granted by him) His objection on this is, that he does not want investors get between us and influence one of us (basically me). Due to ~67%, this only can happen in later rounds. My question is whether it is common to have such an agreement between founders and what implications would such an agreement make for me. Thus what is the worst that can happen, etc... Thank you all very much in advance!

Answers

Topic Expert
Kent Thomas
Title: Founder
Company: Advanced CFO Solutions
(Founder, Advanced CFO Solutions) |

Your "partner" is either overly cautious or overly concerned about having control and/or keeping you from ever having the ability to stop him from doing whatever he wants to do - either way it is a "red flag" to me. If he trusts you enough to give you 33.33% ownership, he should trust you to vote wisely. If you sign the voting agreement you will be obligated to comply even if it is not in your or the company's or other shareholder's best interest - I believe that is a dangerous situation to be in. Since no one can anticipate all of the situations that may occur, I would caution you against signing it. I believe that you can negotiate a more reasonable and fair situation and since you are obviously a CTO with significant expertise (i.e., value), you don't have to settle for whatever this founder wants to offer. If you do decide to move forward and he decides to get reasonable, I suggest that both of you agree in advance to have your shares "vest" over time and to sign a buy/sell agreement to assure that you both have reason and motivation to stay with the Company once you start down the startup path. If one of you leaves prematurely, you should not be able to take a large ownership stake with you when you won't be an active, contributing partner any longer. Get a good attorney to represent you and listen carefully to her/his experienced advice - it will cost you a little now but save you a great deal in the future.

Good Luck!

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I agree with Kent. Why is he getting 2/3 of the shares to start with, and if it is his idea and his money, why does he need you.

As for the voting restriction, why have a vote period.

The old adage if something smells strange, it probably is, and if the odor is unreasonable, then leave. I think your question answers the unreasonable thresshold.

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