With Nigeria having the largest population on the entire African continent, with the city of Lagos being named Africa’s startup capital, the country’s productivity is bound to increase in the coming years. Nonetheless, there exist some challenges in setting up a new company, especially in a country like Nigeria. To safeguard themselves, corporations starting up in Africa’s largest economy and indeed to pull through successfully in any nation must possess certain contracts that shield them from the rigours of litigation and liability in its growing stages.
Most startups find it tasking to employ an Attorney, this is so because of the cost associated with employing one in Nigeria today. Nonetheless, startups can leverage the Attorney drafting the basic contracts as an independent contractor rather than as a staff of the startup, this can make the process affordable. Some of the contracts you should have your Attorney prepare for your corporation’s success are provided below.
Contracts for Startup companies
This is also known as the founders’ Agreement. The founders engage in a binding legal agreement with each other using the shareholders’ agreement. This agreement is essential being the founders are frequently friends, families or loved ones who agree to start a business together, because of the trust the founders have in each other, it is easy to overlook vital protections that would see to the security of the shareholder’s investment. Money and greed, however, become involved when the company starts experiencing significant success, and the owners lose sight of their initial cordial relationship and goals, which hurts the company eventually.
Each founder or shareholder’s role in the company is described in the shareholders’ agreement, along with the procedures for management decision-making. When disputes develop and tough decisions need to be made, verbal agreements just won’t cut it.
The shareholder’s agreement must be made as soon as the business is up and running since it is legally enforceable and should precede any other commercial contract relating to the founders and the business.
All startups require an agreement like this in your legal toolkit because co-founder disputes are said to be the reason for most startups’ failure. Spend some time with attorneys who are developing one and obtain ideas from other founders who can offer suggestions based on their own experiences.
2. Service Agreements
Another crucial contract for all businesses is the service agreement, especially for those who provide clients’ services on a large scale. For instance, if your startup is an e-commerce business that makes bulk deliveries to particular restaurants, you would need a service agreement to help you set up the fundamental conditions that would govern your business’s relationship with the client.
The services that must be provided, their restrictions, and the procedures to be followed in the event of a disagreement are all spelt out in plain language in the service agreement.
Following the signing of this contract, the startup’s liabilities are significantly reduced, and its obligations are outlined in unambiguous terms.
3. Terms and Conditions
The terms and conditions is a legal document describing how a company or company’s platform gathers, manages, and processes the information of its customers, such as name, emails, phone number, sex, and other sensitive information provided to the startup on its platform or while doing business with the customer.
The terms and conditions are crucial if your start-up collects and keeps customers’ personal information to provide them access to your product or service and for your company to be in accordance with local privacy regulations.
The type of data collected, the reason for collection, how the data will be handled and kept, client rights to access their data, the cookie policy (if any) and consent to collect the data should all be covered in this policy.
4. Investment Agreement
The investment agreement is an agreement between an investor and a startup company. After launching, the next agenda on a startup’s calendar is to source for funding; most startups rely on high-net-worth investors or angel investors to scale through this process of fundraising.
The investment agreement sets the ball rolling for investors and the corporation to understand their obligations, the basic terms of the investment, the key performance indicators and the number of shares or ownership stakes in the company given to the investor.
5. Independent Contractor Agreement
The conditions of employment are outlined in this legally binding agreement between the startup and the employee in the employment contract.
By ensuring that the employer’s requirements are conveyed, the employment contract helps to prevent conflicts. The nature of the position, working hours, pay, a non-disclosure provision, termination and notice terms, and dispute resolution should all be included.
If the startup’s management decides against signing a legally binding employer-employee agreement, they may decide to recruit independent contractors or freelancers to carry out specified, specialized projects. Because the contractor has fewer commitments than an employee would have and because the connection is temporary until the assignment is finished, this can reduce expenses for the company. It should include the kind of work to be done, the anticipated completion date, the parties respective obligations, insurance requirements, and a clause stating that the person is a contractor or freelancer rather than an employee.
6. Non-Disclosure Agreements
Non-disclosure agreements are significant to the overall functioning of the corporate secrecy of the startup. Most startups invent intellectually protected masterpieces that are used to build up the company’s success. Aside from these, certain management practices are vital for the running of the company, these practices must be kept confidential from the company’s competition.
Non-disclosure agreements are drafted with everyone playing a vital role in the business, from employees to the shareholders up to the independent contracts, if the need arises.
Conclusion
Businesses in Africa are established with the overall aim of making success in the market. Having detailed and well-written contracts can better protect the startup from liability and unnecessary litigation in the future. This article brought to bear some of the most vital contracts needed by startups in Nigeria.