Business Setup

Shareholders Agreement -- Startup

A Shareholders Agreement for startups defines the relationship between founders and early investors. Covers equity, vesting, decision-making rights, and exit provisions under the Companies Act 2015.

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What this document covers

Shareholders and their equity percentages
Founder vesting schedule
Board composition and decision-making
Reserved matters requiring shareholder approval
Pre-emption rights on share transfers
Anti-dilution provisions
Drag-along and tag-along rights
IP assignment to company
Governing law (Companies Act 2015)

Frequently Asked Questions

Is a shareholders agreement required under Kenyan company law?
The Companies Act 2015 does not require a shareholders agreement — a company can operate under its Articles of Association alone. However, a shareholders agreement is strongly recommended for startups, as it governs matters not addressed in the Articles (e.g. founder vesting, anti-dilution, drag-along and tag-along rights).
What is a vesting schedule and why is it important for Kenyan startups?
A vesting schedule means founders earn their equity over time rather than receiving it all at once. A typical schedule is 4 years with a 1-year cliff: no shares vest for the first year, then 25% vests at the 1-year mark, and the rest monthly over 3 more years. This protects the company and remaining founders if a co-founder leaves early.
Is a startup shareholders agreement valid internationally?
Yes. Shareholders agreements using common law principles are recognised across the UK, US (for Kenyan law purposes in cross-border deals), Australia, and other jurisdictions. For international investors, specify the governing law. Kenyan companies with foreign shareholders should ensure the agreement complies with the Companies Act 2015.