Preferably use it before raising Qualified Financing/Series A funding as it makes reference to Founders contribution to Capital contribution/Bootstrap Funds.
Article 3.1: Capital Call
Capital Call: is a cash expenditure that is mutually agreed upon prior to and paid by both Founders, per the terms above. Typically, capital calls will be higher cost expenses
”In the event that one of the Founders is unable to meet the capital call, the other Founder will have the right to meet the capital call on their behalf, thereby purchasing equity on the basis agreed upon above…”
- Founders agree on capital call of Ksh 100,000
- At any time within the X calendar day deadline window, the deadline can be extended multiple times and/or indefinitely if both founders agree.
- Founder A is unable to meet their Ksh 100,000 share of call within X calendar days, and no deadline extension has been agreed upon
- Founder B has option to contribute all Ksh 100,000, thereby purchasing 1,000 shares from Founder A. Founder B also has the option to extend the capital call deadline entirely at his discretion (e.g. multiple extensions can be made unilaterally).
- In the event that Founder A only pays Ksh 50,000 of his Ksh 100,000 share of call within X calendar days, Founder B has the option to purchase Ksh,50,000 worth of shares from Founder A.
- If Founder A is unable to meet their share and Founder B is unwilling to cover the full outstanding amount, no equity transaction will be mandated.
Article 3.2: Capital Contribution
Capital Contributions: Unlike capital “calls,” capital contributions will typically be smaller expenses.
Article 3.2.2: Zeroing out of expenses/capital contribution
Zero Out: Any capital contributions will be recorded and “zeroed out” on a regular basis, at the Founder’s discretion
For example, if Founder A has spent Ksh 5000 on business expenses and Founder B has spent 10,000 on business expenses, Founder A will pay Founder B Ksh 5,000 (Ksh 10,000 owed – Ksh 5,000 paid = Ksh 5,000). The Founders have “zeroed out” existing expenses to create a starting point for this system, after which all expenses will be split 50/50, unless other specified.