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Managing risk when starting new companies

By Melissa Higham - 16 Oct 2012

Starting a new company can be risky. There is no guarantee that all founding members will stay the course. Many people do not realise the importance of managing this risk through a written agreement between the founders.

Division of ownership of startup companies between founders may require careful management. If the founders acquire equity in the company when it is first formed, there may be problems if one or more of them leave the company before it is well established. They may retain ownership of a significant portion of the company even though they are no longer actively involved.

This risk can be managed by way of a shareholders agreement. The agreement should be tailored so that it reflects the nature of the company and the expectations of the founders.

Getting an appropriate agreement in place when the company is formed avoids future issues. It also helps make investment by outsiders more attractive.


Melissa Higham


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