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When a co-founder departs a business, it isn’t always easy. It can cause internal challenges and may burden remaining founders and employees with additional responsibilities, especially in today’s dynamic 2025 landscape.
However, it’s vital to protect your business during this transitional period. With evolving market conditions and updated regulatory standards, ensuring your legal documents are robust and current is more important than ever.
So, what happens from here?
First Thing’s First – Review Your Contracts!
The very first step is to review all your contracts. These should include specific exit clauses and other key terms designed to address a co-founder’s departure. In 2025, many businesses are updating their agreements to meet new regulatory standards, ensuring provisions related to business ownership, equity vesting, and rights over your intellectual property are comprehensive. It’s strongly recommended to have these documents reviewed by a lawyer – for example, our Contract Review and Redraft service can help you navigate the process correctly.
Other key considerations include:
- What will happen to your IP assets?
- Will the departing co-founder retain any ownership in the company?
- Are there any non-compete clauses or other restrictive covenants in your agreements?
What About My Investors?
If you’re a startup, maintaining transparency with your investors is crucial. In 2025, clear communication remains key to fostering trust and support from your investor community.
Should a co-founder depart, ensure you promptly inform your investors so they can make informed decisions. This level of openness can guide your next steps in restructuring internal processes and reassures stakeholders. You might also want to review shareholder agreements – our guidance on Shareholders Agreements can help clarify ownership rights during such transitions.
Do I Need To Terminate Them?
If your co-founder is also a board member, terminating their position can be more complex than it first appears. They might have additional rights or contractual demands regarding ownership and decision-making. In such cases, referring to your agreements is essential – you may even require a formal process, such as a Deed of Termination, to ensure the process is legally sound.
If they were issued shares by the company, those shares will likely remain their equity. This matter can lead to disputes, which is why seeking expert legal advice is critical. Our team is well versed in managing these complexities, ensuring a smooth transition.
During the exit process, preventing legal disputes through proactive communication and proper legal assistance can save you both time and stress.
What Else Should I Think About?
Now that we’ve covered the legal aspects, what about everything else?
Your employees may be anxious about next steps or the future direction of the business. It’s important to have a clear communication plan that outlines who will take over certain tasks and details any changes to roles resulting from the co-founder’s departure. Updating your internal policies – for instance, revisiting our Employment Contract templates – can also help maintain organisational stability.
Consider hosting an all-hands meeting or distributing a detailed internal newsletter to keep your team informed and reassured about the company’s future.
Who Can Help Me Through The Process?
Securing legal guidance for your co-founder’s departure is one of the best decisions you can make. Sprintlaw offers a comprehensive Co-Founder Separation package which includes a phone consultation with one of our experienced lawyers, ensuring you receive tailored advice on all legal matters.
If you’d like to discuss your options moving forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat. Our team is up to date with the latest legal developments in 2025 and is ready to help you navigate this challenging process.
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