INTELLIGENCE TOOL

Startups

Comprehensive legal support for founders and investors — from incorporation to the funding round and the exit.

The legal partner that scales with your startup.

Raising capital, splitting equity and growing fast without planting legal problems for tomorrow. We design the corporate structure, the agreements and the investment documentation your startup needs at every stage.

This tool is free to use. If you’re looking for advice for your start-up, take a look at our start-up section. See the practice area.

Startup Legal Health Check

startup-health.ilpabogados.com

Incorporation and shareholder agreement

Corporate structure, vesting, drag-along and tag-along clauses from day one.

Funding rounds

Term sheets, SAFEs, convertible notes and capital increases. Negotiation with business angels and venture capital funds.

Equity and stock options

Employee incentive plans (phantom shares, stock options) and cap table management.

Due diligence and exit

Due diligence preparation, M and A and divestment. Maximise valuation and minimise risk.

The Startup Legal Health Check is a self-assessment questionnaire comprising 45 questions across nine legal areas, ranging from the shareholders’ agreement and cap table to intellectual property, contracts, data protection and preparation for the funding round. It takes 15 to 20 minutes to complete and your answers are saved automatically. It provides an indicative score of your readiness for investors, red flags and a prioritised action plan, with a PDF report.

Understand the result

What does the result mean?

The score measures how many of the points an investor will review during due diligence have already been resolved, grouped into three areas.

Corporate

Shareholders’ agreement and cap table

Vesting, reserved shares, transfer arrangements and a cap table that reflects the actual situation. This is where the serious red flags lie.

Contracts

Customers, employees and partners

Signed, standardised contracts with liability limits, and compliance with the GDPR where personal data is processed.

Intangibles

Intellectual property

Trademarks, software, domain names and trade secrets are held by the company, not by the founders or freelancers.

The greatest burden lies at the corporate level. A shareholders’ agreement with vesting and cliff clauses, reserved matters and a clear transfer regime, together with a well-organised cap table, resolves most serious concerns. The absence of such an agreement, or a founder who has not signed it, can slow down or prevent a funding round.

The second aspect is intangible assets. The valuation of a tech start-up rests on its software, brand and trade secrets, all of which must be owned by the company. The picture is completed by contracts with clients and employees, covering confidentiality and the transfer of intellectual property rights, as well as GDPR obligations where personal data is processed.

It is advisable to seek professional analysis when the score is low and a funding round is planned within the next twelve months, when there are red flags relating to intellectual property or the shareholders’ agreement, or when the business operates in a regulated sector or handles sensitive data. The assessment helps to prioritise issues; it does not replace the investor’s due diligence.

What should a shareholders’ agreement cover?

At least four sections. The founders’ commitment, vesting with a cliff, dedication and non-competition clauses. Corporate governance, reserved matters and vesting mechanisms. The transfer regime, right of first refusal, drag-along and tag-along rights. And the assignment to the company of all intellectual property created by the partners.

Timing is just as important as content. A deal is best negotiated when there is no conflict and none is on the horizon; it is much more difficult when either of these is already present. If the assessment flags this area as a red flag, it is the first thing that needs to be resolved.

The assessment identifies any outstanding issues; resolving them is a matter for legal professionals. If your start-up is preparing for a funding round, needs a shareholders’ agreement, or wishes to clarify the ownership of its assets ahead of a due diligence process, please see our start-up section.

Methodology and sources

What they rely on

The questionnaire is based on Spanish corporate practice and the legislation applicable to a start-up: the Capital Companies Act, Law 28/2022 on start-ups, the Business Creation and Growth Act 18/2022 and the GDPR, together with the standard elements of legal due diligence. The score is for guidance only and the recommendations are general in nature; they do not constitute a legal report on a specific case.

Law 28/2022 on the promotion of the start-up ecosystem — Official State Gazette (BOE)↗ Royal Legislative Decree 1/2010, the Companies Act — Official State Gazette (BOE)↗ Law 18/2022 on the creation and growth of businesses — Official State Gazette (BOE)↗ Regulation (EU) 2016/679 (GDPR) — EUR-Lex↗ ENISA — certification of start-ups↗

Frequently asked questions

What people ask on the legal status of a start-up

What is the ENISA start-up certification?

This is the accreditation that Law 28/2022 mandates ENISA to grant in order to recognise a company’s status as a start-up, which is a requirement for accessing the benefits of the law. ENISA assesses the innovative nature and scalability of the business model, and this status is entered in the Commercial Register.

What benefits does Law 28/2022 offer a certified start-up?

The main ones are: a 15 per cent corporation tax rate during the first financial year in which the company reports a profit and the following three years; an income tax exemption of up to 50,000 euros per year on the grant of share options, a limit of up to 20 per cent on treasury shares in limited liability companies (SLs) for incentive schemes, and a three-year suspension of the grounds for dissolution due to losses.

What are vesting and the cliff?

Vesting is the mechanism by which founders gradually lock in their shareholdings, so that those who leave early do not receive the same as those who stay. The cliff is the initial period, usually one year, during which no shares vest. Investors systematically insist on this.

Phantom shares or stock options?

Share options entitle the holder to acquire shares at a fixed price and make the beneficiary a shareholder, with the tax benefits provided by Law 28/2022 for start-ups. Phantom shares are an economic right that replicates the value of the shareholding without appearing on the cap table, and are simpler to implement under Spanish law. In both cases, the scheme must set out the vesting schedule and exit conditions.

When is it advisable to set up a limited company?

As soon as there is more than one founder and the project generates assets, code, a brand or contracts, everything created beforehand will have to be transferred to the company at a later date. Under Law 18/2022, an SL can be incorporated with a share capital of one euro. Delaying the process is usually more expensive than doing it sooner.

Who owns the code for my start-up?

A programme created by an employee in the course of their duties is presumed to have been assigned to the company, in accordance with Article 97.4 of the Intellectual Property Act. Code written by a freelancer remains their property unless expressly assigned in writing, as does any code developed prior to the company’s incorporation. Without such assignments, ownership of the main asset remains in doubt.

What contracts does a start-up need when it first starts out?

The partnership agreement; employment and contractor contracts covering confidentiality and the assignment of intellectual property; standardised terms and conditions for contracts with clients, including liability limits; and, where personal data is processed, the privacy policy and data processor agreements under Article 28 of the GDPR.

Related analysis