What is Indemnification clause in SHA?

An indemnification clause is a "hold harmless" provision. In a Shareholders' Agreement, it typically means that the founders promise to reimburse the investors for any losses incurred due to a breach of the representations and warranties made by the founders (e.g., about taxes being paid or owning the IP).

Startup Example: After funding, an investor discovers the startup had a large, undisclosed tax liability. The indemnification clause allows the investor to recover the financial loss from the founders personally.

We help founders understand and negotiate these crucial legal clauses.