It is a preliminary agreement that documents the understanding between the future partners on the principles that will govern the company of the startup being formed. It should be signed while the business is still in its conception phase, when the innovative idea and business model are being structured, but before the company is legally formalized.
This document helps to align expectations among the co-founders, defines basic rights and responsibilities and sets out how strategic decisions will be made. Although it is no substitute for a memorandum of association, a well-drafted MoU can prevent future conflicts and ensure a solid foundation for the company's formation.
It is worth noting that this instrument will not always be the best option for all startups, especially those operating in regulated sectors, such as fintechs, which may require different formalizations from the outset.
What can't be missing from your MoU?
Although there is no compulsory template, some key points should be included:
- Object of businessclear description of the project that will serve as the basis for all definitions
- Rights and dutiescontributions, responsibilities and benefits of each member
- Corporate structureprofit sharing and initial share division
- Governancerules for making important decisions
- Formalization milestonesevents that will trigger the formal formation of the company
- Fundraisingrules for future investments
- New members joinconditions for admission and shareholder dilution
- Minimum bondessential period of permanence of the founders
- Members leavingrules for termination and liquidation of participation
- Business protectionconfidentiality and non-competition clauses
