A legal reference for cap table structure, founder agreements, and investor negotiations under Greek law.

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The Numbers: What Happens to Founder Ownership

Median Founder Ownership Across VC Rounds (9,304 startups, 2023-2026):

• Seed: 54.8% founder, 12.1% employee pool, 20.6% sold in round, 12.5% prior investors
• Series A: 35.6% founder, 14.4% employee pool, 20.0% sold, 30.0% prior investors
• Series B: 21.8% founder, 15.6% employee pool, 16.5% sold, 46.1% prior investors
• Series C: 16.1% founder, 16.8% employee pool, 12.6% sold, 54.5% prior investors
• Series D: 10.4% founder, 18.2% employee pool, 10.2% sold, 61.2% prior investors

Critical Transition: Founder control transfers to investors at Series A (below 50% ownership).

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Part I: Greek Law & Share Dilution

Statutory Requirements (Law 4808/2021, GCC Art. 85-91)

Pre-emptive Rights (Art. 11, Law 4808/2021):

• Existing shareholders must be notified of all capital increases
• Shareholders have proportional right to subscribe to new shares
• Failure to notify = voidability of share issuance
• Many founders lose this right without realizing it

Board & Shareholder Approval:

• Capital increases in ΙΚΕ require General Meeting approval (simple majority)
• Minutes must be filed with ΓΕΜΗ within 30 days
• Missing documentation = investor due diligence red flag
• Cost to fix retroactively: €3,000–8,000 + 2-3 week delay

Tax Compliance:

• Share issuances must have documented valuation
• Tax Authority challenges underpriced shares = constructive income to founder
• Risk: 40% marginal tax rate on “deemed gift” of equity
• Prevention: Independent valuation report filed with tax authority

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Part II: Founder Agreements & Co-founder Equity

Why Written Founder Agreements Are Mandatory

Without agreement, Greek law defaults to:

• No clawback mechanism for departing founders
• No buyout trigger or valuation method
• No dispute resolution (= litigation)
• Ambiguous IP ownership (= investor refuses to fund)
• Tax compliance exposure

Investor due diligence checklist:

• Is founder agreement executed by all founders? (Missing = deal killer)
• Are vesting schedules documented? (Missing = investor assumes dispute risk)
• Is IP formally assigned to company? (Missing = investor walks away)
• Are founder roles & contributions justified for equity split? (Arbitrary splits = renegotiation)

Essential Founder Agreement Clauses

Vesting Schedule:

• 4-year vesting with 1-year cliff (0% if founder leaves before year 1)
• 25% vests at 1-year anniversary, then 1/36th monthly
• Shares held in escrow until vesting threshold met

Acceleration Events:

• Change of control: 100% immediate vesting (ensures founder participates in exit)
• Disability/death: 100% immediate vesting to founder or estate
• Involuntary termination without cause: 50% immediate vesting + severance + extended exercise period

Risoluzione delle controversie:

• Russian roulette buy-sell clause for equal co-founders
  • Founder A offers price X for Founder B’s shares
  • Founder B chooses: sell at X OR buy Founder A’s shares at X (incentivizes fair pricing)
• Binding arbitration under Law 2696/1999 (Greece’s Arbitration Law)
  • Single arbitrator from Athens Arbitration Center
  • Award within 90 days
  • Losing party pays 80% of arbitration costs
  • Enforceable across EU under Brussels Regulation (EC 44/2001)

IP Assignment:

• Pre-existing IP: Founder retains ownership, licenses to company royalty-free, perpetual, exclusive
• Work product IP: All IP created post-formation = company ownership (founders assign all rights including moral rights per Law 2121/1993 Art. 10)
• No formal assignment = investor demands it retroactively or refuses to fund

 

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Part III: Investor Due Diligence Checklist

Documentation Required (Investor Will Reject Deal Without These)

Document	Legal Requirement	Missing = What Happens
AMKE/ΑΕ Articles of Association (Καταστατικό)	GCC Art. 3 requires filing with ΓΕΜΗ	Cap table is legally void, investor can’t perfect ownership
Cap Table Spreadsheet	Investor standard (not legally mandated)	2-4 week restatement delay + audit discrepancies discovered
Board Minutes & Shareholder Resolutions (Πρακτικά)	Law 4808/2021 Art. 12 requires documented approvals	Investor challenges validity of prior equity issuances
Executed Founder Agreement	GCC Art. 85-91 defaults apply without agreement	Investor assumes co-founder dispute risk, demands renegotiation
Employee Option Plan	Law 3755/2008 requires written plan	Tax audit risk for all employees, costly retroactive documentation
IP Assignment Agreements	Law 2121/1993 & Law 3469/2006 require written assignment	Investor refuses to fund, founder retains copyright to core IP
Option Grant Agreements	Law 3755/2008 requires formalized grants	Tax & employment law exposure for company
Shareholder Agreement	GCC Art. 85-91 + private contracts binding	Investor’s protective provisions unenforceable
Fully Diluted Cap Table	Investor standard (shows ownership if all options exercised)	Investor discovers hidden dilution, walks away or renegotiates valuation down
Outstanding SAFEs/Convertible Debt	Must be disclosed & quantified (cap, discount, MFN)	Investor faces unexpected dilution, kills deal or forces renegotiation
Employee Equity Agreements	Law 2111/1920 (Employment Law) requires formal agreements	Employee disputes block Series A closing

 

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Part IV: Series A Term Sheet Negotiation

Board Composition: Founder vs. Investor Language

INVESTOR-FAVORABLE (RED FLAG):

• 3-person board: Investor director + Founder CEO + Neutral third party
• Neutral director breaks ties = investor effectively controls board
• Founder loses autonomous decision-making

FOUNDER-FRIENDLY (STANDARD):

• Board: Founder CEO (non-removable 4 years, absent cause) + Investor director + Founder B or neutral party
• Major decisions (sale, merger, liquidation, equity >€500K, related-party >€250K, C-level removal) = require 2/3 supermajority
• Operational decisions (hiring, vendor agreements, product, marketing) = CEO autonomous authority
• This balance preserves founder control while giving investor oversight

Key Term Sheet Provisions: What to Negotiate

Liquidation Preference

Anti-Dilution

Protective Provisions (What Investor Needs Approval For)

Drag-Along Rights (M&A Liquidity)

Representations & Warranties Liability (Your Personal Risk)

Key protection: Cap founder indemnification at specified amount or % of investment, survives 12 months only.

Specimen language:

• “Founder indemnification capped at €X and survives 12 months post-close”
• “Founder has no personal liability for company representations (company liable, not founder)”
• “Excludes ordinary business risks, market competition, future performance”

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Part V: Red Flags That Kill Series A Closes

Pitfall 1: Undisclosed SAFEs or Convertible Debt

The problem:

• Founder raised €200K from angels via convertible notes (never mentioned to Series A investor)
• Angels have 20% discount + MFN clause
• Series A investor discovers notes in due diligence
• Investor’s ownership is lower than expected (notes convert ahead of investor)
• Result: Deal dies or investor demands cap table restatement

Prevention:

• Disclose all convertible debt/SAFEs in initial cap table
• Track conversion mechanics (cap, discount, MFN) upfront
• Model how notes affect Series A investor ownership percentage

Pitfall 2: Missing Employee IP Assignment

The problem:

• Engineer hired month 2 created core algorithms
• No IP assignment agreement ever signed
• Investor’s counsel discovers engineer may own rights to IP
• Investor demands engineer sign retroactively OR investor backs out
• Engineer negotiates for extra equity (creates dispute)

Prevention:

• Require all employees to sign IP assignment at hire date
• Document pre-existing IP ownership in writing
• Include IP assignment in offer letter and employment agreement

Pitfall 3: Founder Vesting Cliff Dispute

The problem:

• Founder B leaves month 10 (1-year cliff, so gets 0%)
• Claims founder agreement unfair, disputes enforceability
• Threatens litigation over “implied partnership” rights
• Deal cannot close pending resolution

Prevention:

• Both founders obtain independent legal counsel before signing
• Document that founders understand equity is “at-risk” if they leave early
• Both sign acknowledgment of vesting consequences
• Include arbitration clause if disputes arise

Pitfall 4: Incomplete Board Documentation

The problem:

• Cap table shows Series A share issuance
• No board minutes or shareholder resolutions exist
• Investor’s counsel: “Is capital increase properly authorized under Greek law?”
• Investor demands retroactive resolutions drafted & signed by all founders
• Result: 2-3 week close delay

Prevention:

• Maintain board minutes (Πρακτικά Συνέλευσης) for all major decisions
• File resolutions with ΓΕΜΗ within 30 days of shareholder meeting
• Document governance from day one

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Part VI: Employee Option Pool

Tax-Advantaged Option Requirements

Grant:

• Options granted at Fair Market Value (FMV) avoid ordinary income tax on grant date
• FMV must be documented & reasonable (valuation report or comparable company analysis)
• Failure to document FMV = Tax Authority deems higher value = constructive income to employee

Exercise:

• Employee pays ordinary income tax on spread between FMV & exercise price
• Capital gains tax only on appreciation after exercise

Plan Requirements:

• Written plan approved by Board of Directors
• Individual option grant agreements specifying: grant date, vesting, exercise price, expiration, change of control
• Standard: 4-year vesting, 1-year cliff
• Change of control: 100% acceleration (ensures employees participate in exit)

Pool Sizing

Data shows growth: 12.1% (Seed) → 18.2% (Series D)

Common mistake:

• Reserve 10% option pool at Seed
• Hire aggressively post-Series A
• By Series B, pool is 80% allocated and 5 engineers need to be hired
• Series B investor demands new 15% pool created
• Result: All shareholders diluted to make room (preventable by proper sizing at Seed)

Best practice:

• Model 18-month hiring plan
• Reserve 15–20% fully diluted
• Formalize plan before hiring employees
• Track allocations in cap table spreadsheet

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Part VII: Pre-Series A Founder Checklist

Capital Structure:

• Valuation benchmarked against comparable rounds + your metrics
• Dilution % modeled forward through Series B & C (not just Series A)
• Fully-diluted cap table clear: all options, SAFEs, convertible debt quantified

Governance:

• Non-removable board seat for founder CEO (4+ years absent cause)
• Protective provision veto over: sale, major dilution (>15%), C-level removal
• Board size 3–5 people (not 7–9, which dilutes founder influence)

Liquidation Preference:

• 1x non-participating (never 1x participating or 2x)
• Waived if proceeds exceed 2x post-money valuation OR absolute cap €X

Anti-Dilution:

• Narrow-based weighted average (never broad-based)
• Carve-outs for options, acquisitions, spin-outs

Employee Options:

• Pool is 15–20% of fully diluted cap table
• Plan formalized & board-approved before first hire
• Change of control = 100% acceleration

Term Length:

• Liquidation preference & protective provisions survive 4+ years (not 1–2)
• Pro-rata rights allow founder to maintain ownership % in follow-ons

Personal Protection:

• R&W indemnification capped at specified amount
• Survives 12 months post-close only
• Founder has no personal liability (company liable, not founder)

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Common Legal Mistakes by Stage

Pre-Seed

• No founder agreement (handshake only)
• No formal option plan
• IP not assigned to company
• Board minutes not maintained
• No cap table spreadsheet

Seed Round

• Pre-emptive rights not exercised by founders
• Capital increase not properly documented with ΓΕΜΗ
• Valuation not supported by independent appraisal (tax audit risk)
• Conflicting equity promises to early employees (verbal, unwritten)
• No shareholder agreement between founder & angel investor

Series A Preparation

• Missing board resolutions for prior equity issuances
• Undisclosed SAFEs or convertible debt
• Option plan exists but grants not formalized
• Founder equity diluted more than expected (no cap table modeling)
• No protective provisions negotiated in angel term sheet

Series A Negotiation

• Board seat not guaranteed in final agreement (just promised verbally)
• Liquidation preference not capped (flat acquisitions = zero founder proceeds)
• Anti-dilution broad-based (founder diluted more in down rounds)
• No change-of-control acceleration for employee options
• R&W liability uncapped (founder exposed for years post-close)

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How Tsamichas Law Firm Helps

Cap Table Architecture

Founder Agreements

AMKE Incorporation & Governance

Employee Option Plans

Series A Preparation

Investor Due Diligence Support