As part of our Founder Series, in this piece we look at the
'Cause' clause in founder employment agreements and
shareholder's agreements. Essentially, under employment
agreements this provision outlines circumstances/ events that
trigger the termination of a founder's employment or leadership
role within the company, without the obligation on the company to
provide severance or other associated benefits. More often than not
the 'Cause' clause also finds its way into
shareholders' agreements, setting in motion breach and default
remedies (potentially including an accelerated exit) for investors
under the shareholders' agreement.
As a founder, expect the kitchen sink and more in the first
draft of the 'Cause' clause. This means inclusion of all
anticipated events that might in any way affect the business,
integrity, operations, or reputation of the investee company. For
example, an all sweeping 'Cause' clause will attempt to
include "an act of moral turpitude" by the
