The life science sector’s capital intensity, long development cycles, heavy regulation, and centrality of intellectual property mean that early choices directly influence fundraising, tax efficiency, control, and exit options.

Getting the basics right at incorporation and maintaining discipline as the business scales will reduce friction in diligence, protect founders’ interests, aid in securing investment and preserve value. A well‑drafted shareholder agreement, integrated with employment, IP, and, if appropriate, option plan documents, is the cornerstone that protects founders while remaining investor‑ready and facilitating the ambitious partnerships typical of life sciences growth.

Below we have provided some practical guidance for early-stage companies in the life science space from a corporate, IP, and regulatory perspective.

1. Getting the right structure

It is important to work with competent tax and legal advisors to develop a corporate structure that aids the company in ring‑fencing risk, protecting IP, facilitating future fundraising, and taking advantage of available tax credits. When creating the classes of shares and cap table it is best to keep things simple where possible.

2. Shareholder agreements and protecting founders’ interests

A robust shareholder agreement aligns long‑term objectives, sets decision‑making mechanics, and protects founders during growth and financing. Founders can protect their interests when drafting a shareholder agreement by including the following:

  • Board nominee rights supported by voting thresholds that expressly require the approval of founder nominees.
  • Shareholder voting thresholds that require the approval of founders for certain fundamental matters such as changes to share capital, material asset/IP disposals, incurring debt, or selling the company.
  • Pre-emptive rights on new security issuances that permit founder participation in future financing rounds, and rights of first refusal on any share transfers in order to assist in maintaining proportional ownership and control.
  • Drag‑along and tag‑along provisions to facilitate exits while protecting minority holders, taking care to include majority thresholds to trigger drag-along provisions to guard against coercive sales.
  • Information rights that require the company to provide founder shareholders with appropriate quarterly and annual information to monitor the progression of the company (noting that if a founder loses the ability to appoint a director to the board then the founder is not entitled to much information under the applicable corporate statute).
  • Balanced good leaver/bad leaver provisions to allow for the repurchase of shares in the company for departing founders.
  • Suitable confidentiality, non-competition, and non-solicitation provisions.

Of course, founders should be mindful to balance the protection of their interests against the needs and wishes of potential investors. If a shareholder agreement is too founder-friendly then a material investor may demand that a new shareholder agreement is drafted as part of a financing round.

Any employment or contractor agreements for founders should support the protections outlined in the shareholder agreement, particularly with respect to IP assignment, confidentiality and any restricted covenants that are enforceable in the employment/contractor context.

3. Securing and protecting IP rights

The company’s value will rest on clear, unencumbered ownership of IP rights to its central products and services. Founders and all contributors should ensure that employment, contractor and partnership agreements clearly assign IP rights to the company and contain appropriate confidentiality terms. Similar approaches should be applied to any agreements with employees, collaborating companies and contract organizations. This ensures that the company, and not individuals or other entities, are the sole owner with full control over their IP.

If a company is spinning out from academia, IP licences on any academically licensed IP should be formalized with clear terms relating to: permitted field‑of‑use and territory, license duration and renewal, sublicensing and transfer rights, ownership over improvements, and responsibility for pursuing and maintaining new and existing IP rights.

Companies should likewise develop processes that identify and enable the protection of new IP rights. This includes an invention disclosure process, an IP strategy plan, appropriate data retention policies, and appropriate budget preparation for IP filings aligned to the company’s development roadmap.

4. Regulatory strategy and commercialization pathways

Early regulatory planning is critical for new life science companies because decisions made at incorporation and during initial scaling directly affect research and development timelines, approval pathways, and investor diligence readiness.

A coherent regulatory strategy should be developed alongside corporate structuring, shareholder arrangements, and IP planning so that governance, capital allocation, and data generation are aligned to the company's approval pathway with the applicable regulator, such as Health Canada. In practical terms, this means mapping the route to commercialization and sequencing financing and partnerships to support that plan from the outset, thereby reducing friction in diligence and preserving value through subsequent funding rounds.

For companies developing drugs, regulatory strategy should be integrated with IP strategy to ensure critical timelines are met and the full implications of IP decisions are understood. In Canada, this integration is particularly important given several interconnected considerations between IP and marketing authorization of drugs.

From the strict timing requirements linking the registration of eligible patents on Canada's Patent Register to a drug's marketing authorization, to the impact that Canada's Patented Medicine Prices Review Board will have on the price of a company's patent-protected drug, investors will scrutinize how IP rights will affect a product's commercialization. It is therefore prudent to ensure IP strategy is thoughtfully calibrated to the regulatory and commercialization plan from day one.

Founders should anticipate the due diligence lens applied to regulatory strategy and readiness to accelerate financing and partnership negotiations typical of life sciences growth. Establishing a living regulatory roadmap, anchored to the company's development timeline and IP strategy, helps management justify capital needs, align stakeholder expectations, and demonstrate the pathway to regulatory approval.

Ultimately, by treating regulatory strategy as a core pillar on equal footing with corporate structure, shareholder agreements, and IP management, early-stage companies can improve their probability of timely approval, reduce diligence friction, and protect founder and investor interests throughout the company's lifecycle.

If you have any questions about this guidance, please contact the authors or a member of Gowling WLG’s Life Sciences team.