The package includes 22 documents and forms, most needed for startups and investors. Startup Estonia’s Startup Community Development Manager Liisi Org states that although starting a company in Estonia is easy, founders do struggle with formalising contracts and documents, with legal advice being a substantial extra cost for starting founders. ‘’In cooperation with law firms we are offering a set of model documents for startups and their investors, compiled by law firms dealing with startups using best practices’’, she adds.
There are plenty of examples of use cases for the model documents. When starting a company, it is important to sign a Founders Agreement to determine the roles of the founders, how much of the company each founder owns, and what happens if a founder departs the company. The Articles of Association regulate how important decisions are made and how the shares can be sold. Every investment in a startup starts with a term sheet and ends with an investment agreement. Startup Estonia’s package includes term sheets and final investment documents both for convertible loans and equity investments in the seed round. Every startup must maintain a Cap table showing the ownership percentage of each shareholder and option holder. As the company grows, it signs Employment Agreements and Option Agreements with its employees. IP Assignment Agreements guarantee that all the IP created for the company remains with the company and Non-Disclosure Agreements protect the company’s trade secrets.
The model documents were first created in 2017 and are now updated. Antti Perli, counsel at Ellex Raidla, who led the working group preparing the comments of the document on the updates: ‘’We added comments to all of the resources, which should help with more complicated terms and should ease the process of decision making to startups. For example, we added a Cap table, allowing entrepreneurs to test the allocation shares between founders, employees and investors while raising new investments. Investment documents are now built to also be used in A-rounds, additionally to seed rounds.’’
The documents have been drafted by Estonian law firms Ellex Raidla, Cobalt, Eversheds Sutherland, Hedman Partners, TGS Baltic, Sorainen, Fort Legal, Triniti and Njord.
Once again, the documents can be found here: https://startupestonia.ee/resources