Client
Our client, PadiePay Global Payments Inc., is a rapidly growing fintech company providing innovative financial technology solutions. As the company scaled and prepared for upcoming funding rounds, it needed to formalize its relationships with shareholders and allocate equity effectively for future investors, including friends and family, angel investors, and institutional investors.
Problem
The fintech company required legal advice to formalize its shareholder relationships and structure its equity allocation for future funding rounds. They needed a comprehensive Shareholder Agreement (SHA) to define ownership rights and governance while reserving equity for friends, family, and angel investors in the pre-seed and seed rounds, as well as institutional investors, such as venture capitalists, in the Series A round.
Approach
We collaborated with the client to understand their business objectives, advised them on their shareholder relationships and equity allocation strategy, and drafted a comprehensive SHA that included key equity provisions. Our approach involved the following steps:
- Understanding the Client’s Needs and Future Funding Goals: In discussions, it became evident that the fintech company aimed to secure long-term funding through multiple investment rounds. They wanted to ensure:some text
- Equal stake allocation between co-founders and shareholders.
- Reserved equity for friends and family or angel investors in the pre-seed and seed rounds.
- Share allocation for institutional investors, such as venture capitalists, in later funding rounds, specifically during the seed and Series A rounds.
- Advising on Key Components of the SHA: We guided the client on several crucial aspects of the SHA, including equal stake allocation, pre-seed and seed round allocations, institutional investor provisions, and governance structure.
- Drafting the SHA: Based on the client’s objectives, we drafted a detailed SHA covering:
- Equal Distribution: Formalized an equitable split between co-founders and key shareholders, establishing balanced control while accommodating future dilution through funding rounds.
- Pre-Seed and Seed Round Allocations: Incorporated dedicated equity allocations for friends, family, and early angel investors, recognizing and rewarding their contributions in the initial funding phases.
- Institutional Investor Provisions: Established a reserved equity pool for venture capitalists and angel networks participating in the seed and Series A rounds, ensuring the company could raise institutional capital without disproportionately diluting existing shareholders.
- Governance Structure: Detailed shareholder rights and responsibilities regarding decision-making, board appointments, and veto rights on key decisions, such as equity issuance.
- Finalising the SHA: After completing the draft, we shared the SHA with the client for review to ensure it aligned with their equity strategy and governance needs.
Result
The fintech company successfully formalized its shareholder relationships through the SHA, establishing a clear and effective equity allocation strategy that supports its growth ambitions.
