The Pre-Seed Legal Stack: What Canadian Founders Need Before Hiring

Incorporation Is Step One, Not the Finish Line

You filed your articles of incorporation — congratulations, you have a legal entity. But incorporation alone does not protect your intellectual property, establish enforceable equity terms, or satisfy the due diligence that any serious angel investor or fund will run before writing a cheque. What you need is a minimum viable legal infrastructure, assembled in the right order, before you make your first hire, take your first meeting with an investor, or sign your first customer contract.

This is the exact document stack, in priority order, that every Canadian pre-seed company should have in place.

Priority 1: IP Assignment Agreements

This is the single most important legal document for a pre-seed company, and the one most often overlooked. Under the Canadian Copyright Act, s.13(3) gives employers ownership of works created by employees in the course of employment — but only for copyright, not patents, trade secrets, or other forms of intellectual property. And for independent contractors, the default is reversed: the contractor owns everything they create, even if you paid for it.

Every person who has contributed to your product — co-founders, early contractors, freelance developers, that friend who helped with the branding — needs to execute an IP assignment agreement that transfers all intellectual property rights to the company. This includes copyright, patent rights, trade secret rights, and moral rights waivers (moral rights cannot be assigned under Canadian law, but they can be waived).

If you raise a Series A without a complete chain of title for your IP, you will be asked to fix it retroactively — which means tracking down every person who ever contributed code, design, or content to your product and asking them to sign an assignment. Some of those people will be difficult to find. Others will want compensation. Get this done now.

Priority 2: Founders Agreement or Lock-Up

Before you bring on investors, employees, or advisors, the co-founders need a written agreement that addresses four critical questions: How is equity split? What is the vesting schedule? What happens if a co-founder leaves? Who makes what decisions?

A founders lock-up agreement or shareholders agreement at this stage does not need to be complex. It needs to establish reverse vesting (typically four years with a one-year cliff), define the buyback mechanism for unvested shares, allocate decision-making authority, and set out a dispute resolution process. Under the CBCA or OBCA, there is no default vesting — shares are fully owned from the moment they are issued — so this protection must come from a private agreement.

Priority 3: Confidentiality Agreements (NDAs)

You need two types of NDA ready to deploy: a mutual NDA for discussions with potential partners, investors, and collaborators, and a one-way NDA for employees, contractors, and advisors who will have access to your proprietary information.

The NDA must define "confidential information" with precision — not an overbroad catch-all — and include reasonable time limits, clear carve-outs for publicly available information, and remedies that are proportionate to the business interest being protected. As the Supreme Court of Canada established in Lac Minerals Ltd. v. International Corona Resources Ltd., information must meet a threshold of confidentiality to be protectable, and the scope of the obligation must be reasonable.

Priority 4: Employment Agreements (Post-Waksdale)

Before your first hire, you need an employment agreement template that complies with current Ontario employment law — which means, specifically, the Ontario Court of Appeal's decision in Waksdale v. Swegon, 2020 ONCA 391. Waksdale held that if any provision in a termination clause is unenforceable — including a for-cause provision the employer never relied on — the entire termination scheme fails, and the employee is entitled to common law reasonable notice.

Your employment agreement needs to include: enforceable termination provisions that track the Employment Standards Act (ESA) minimums without falling below them in any scenario; an IP assignment clause that covers all forms of intellectual property; restrictive covenants that comply with the Shafron v. KRG Insurance Brokers framework for reasonableness; and a probationary period clause that complies with ESA s.54 (three months maximum for ESA purposes).

Priority 5: Corporate Resolutions and Articles

Your articles of incorporation should include share transfer restrictions (required for private companies under the OBCA), authorized share classes that give you flexibility for future financing rounds (common shares and at least one class of preferred shares), and any other structural provisions your shareholders agreement will reference.

You also need initial resolutions appointing directors and officers, adopting by-laws, and authorizing share issuances to the founders. These are not optional formalities — they are the corporate record that investors and acquirers will examine during due diligence.

Priority 6: Advisor Agreements

If you are issuing equity or options to advisors, you need a written agreement that includes a vesting schedule, an IP assignment clause, confidentiality obligations, and a clear description of the advisory services. The FAST Agreement (Founder/Advisor Standard Template) is a common starting point, but it was designed for US law and needs adaptation for Canadian tax and securities considerations.

What Can Wait

Not everything needs to be in place before your first hire. A full shareholders agreement with investor provisions, a stock option plan, a privacy policy, and commercial contracts can wait until the relevant trigger event — your first institutional investor, your first employee grant, your first product launch, or your first enterprise customer. But the six priorities above cannot. They protect the three things that matter most at pre-seed: your IP, your equity structure, and your ability to hire without creating legal liability.

The Due Diligence Reality

Every institutional investor — and most sophisticated angels — will run legal due diligence before investing. They will ask for your articles, by-laws, shareholder agreements, IP assignments, employment agreements, cap table, and corporate resolutions. If any of these are missing, incomplete, or poorly drafted, the deal slows down while you scramble to fix them, or it dies entirely.

The time to build your legal infrastructure is before you need it. Not after.