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Management Rights Letter: Granting Institutional Investors Oversight Access
When startups take money from venture capital funds subject to ERISA or similar regulations, those funds need a special document: the Management Rights Letter (MRL). This short but powerful agreement ensures the investor has sufficient rights to “manage” their investment, helping them comply with legal requirements.
Indemnification Agreement: Personal Protection for Startup Directors and Officers
When startup leaders make tough calls - hiring, spending, pivoting - they expose themselves to personal liability. The Indemnification Agreement serves as a legal shield, protecting directors and officers against lawsuits, claims, and costs incurred while serving the company.
ROFR and Co-Sale Agreement: Managing Share Transfers While Preserving Cap Table Control
In venture-backed startups, control of the cap table is critical. The Right of First Refusal and Co-Sale Agreement (ROFR/Co-Sale) helps founders and investors maintain that control by regulating how shares are transferred - particularly when founders, early employees, or other major holders want to sell.
Voting Agreement: Aligning Shareholder Power in Key Company Decisions
While founders often assume they’ll control their company post-funding, the Voting Agreement tells a more nuanced story. This document outlines how shareholders agree to vote their shares on critical company matters, including board elections and future financing approvals.
FAQs
Open allCan a waiver and release be mutual?
Yes. In many settlements, both parties agree to release each other from claims, creating a clean break for both sides.
Do employees need extra protections when signing a waiver?
Yes. Federal law requires review and revocation periods in certain situations, especially for employees over 40. This ensures the agreement is fair and enforceable.
Are waiver and release agreements always enforceable?
Not always. Courts require the agreement to be clear, voluntary, and compliant with state-specific laws. Some claims, like wage or workers’ compensation rights, may not be waived.
What is the main purpose of a waiver and release agreement?
It protects your startup by having another party waive their right to bring certain legal claims against you.
What should startups prioritize when reviewing commercial agreements?
Focus on intellectual property rights, payment terms, liability limits, and termination clauses, as these areas create the most potential risk.
Can I use a template for commercial agreements?
Templates are a good starting point, but every deal has unique risks. Having counsel customize terms ensures your startup is protected.
Do startups need different agreements for vendors and customers?
Yes. Vendor agreements protect you when purchasing services, while customer agreements protect you when selling or licensing your own products.
What’s the difference between a sales agreement and a licensing agreement?
A sales agreement transfers ownership of goods or services, while a licensing agreement grants permission to use intellectual property without transferring ownership.
How do MSAs and SOWs protect intellectual property?
These agreements clearly define who owns the work product, whether ownership transfers to the customer, or if your startup retains certain rights. This clarity helps prevent disputes later.
Can an SOW exist without an MSA?
Yes, but it is less efficient. Without an MSA, every project must include all legal terms, which can slow down deals and create inconsistencies.
Do all startups need an MSA?
Not always, but if you plan to work with a customer or vendor on more than one project, an MSA saves significant time and prevents repeated negotiation.
What is the main difference between an MSA and an SOW?
An MSA sets the overall legal terms of the relationship, while an SOW outlines the specifics of an individual project.
Does every investor get an MRL?
No. Only institutional investors that need it for compliance, not angel investors or most venture funds without ERISA LPs.
Is an MRL negotiable?
Generally, no. It’s considered a standard compliance document, though founders can negotiate limits on inspection frequency or reporting burdens.
Does an MRL give investors board seats or control?
No. It typically provides inspection rights, reporting access, and sometimes observer rights—but no formal voting authority.