Law firm Veat’s expert review regarding the departure of a co-founder and the execution of a stock acquisition contract

Law firm Veat received a request from a Web3 company (hereinafter referred to as "client") to review potential legal risks that may arise from the departure of one of the co-founders and to provide support in reviewing the stock purchase agreement.

Law firm Veat protects the client from internal instability within the company and analyzed potential legal risks in the process of acquiring the shares held by the departing co-founder so that the client can proceed with the business smoothly even after the co-founder's departure. Specifically, we provided guidance on reviewing the content to prevent the possibility of disputes over shares or other rights to the company, even after the co-founder’s departure, especially in situations where a founding agreement has not been concluded.

Also, Law firm Veat provided guidance on the obligation of non-competition and confidentiality, as the departing co-founder could inflict serious damage to the client based on the know-how accumulated in the former company, and detailed reviewed and explained the provision prohibiting defamation in case of a non-smooth departure.

Elements to consider when a partner departs

Most startups often begin without a founding agreement that explicitly states the allocation of shares or rights and obligations. In such situations, there is a high probability of disputes over shares or other rights after a co-founder departs, as there are no clear commitments between the co-founders.

Furthermore, there is a possibility that the departing co-founder may start a new business in the same market or leak the former company's trade secrets to a third party, and the co-founder may also make malicious statements about the company and management.

To prepare for such cases, it is essential to clearly state the valuation of the shares, the method of share transfer, and the method of payment in the share purchase agreement when acquiring the shares held by a departing partner.

Also, it is necessary to draft a partnership agreement and include clauses on non-competition and confidentiality to prevent the departing partner from causing negative situations for the company in the future. It is also important to review legal measures to protect the company's reputation against negative statements made by the departing partner.

Therefore, we recommend that startups receive a comprehensive legal review from a lawyer specializing in corporate advisory services before a co-founder departs, so that the business can continue stably even amidst significant changes.

Law firm Veat provides optimized solutions to various legal issues faced by various startups and companies based on abundant experience and legal expertise in the startup field.

In particular, Law firm Veat provides professional advice based on a deep understanding of legal requirements related to advanced technology industries such as IT, startups, and Web3.

If you need a review of a founding agreement, a stock purchase agreement, or any other partnership agreements, please contact Law firm Veat.

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Law firm Veat"