Founders’ Agreement
Create a strong foundation for your company with a founder’s agreement listing your roles, responsibilities, capital and compensation.

Overview

Starting a business has always been exciting, inspiring and phenomenal. However, the majority of the businesses shut down within a few years due to certain reasons, with a prominent one being the non-consensus and friction between the founders. It is always essential for founders to come together and agree on their roles, compensation, structure. A Founders’ Agreement is an official contract that is signed between all the co-founders of a firm. This document states all the responsibilities, ownership, and initial investments made by each of the founders of the company. It is advised to make a founders’ agreement at the incorporation stage of an enterprise as it will lay out the responsibilities and roles of each of the co-founders. These relationships, once documented in the form of agreements, help in identifying, mitigating any potential risk, and bringing transparency with these resources.

How is it done?

Authorisation letter is signed to get attorney on board
Details are discussed with attorney
Founder’s terms of agreement are defined in a signed contract, consisting of
Roles and Titles for every founder
Scope of work and responsibility
Shares and equity
Capital Structure and Decision making
Timeline including investments, vesting schedule and deliverables
Non compete, Disclosures and Confidential informations
Dispute Resolution
First draft is completed and shared with the founders
Changes are made, if any, pointed by the founders
Final agreement is signed and stored with founders as well as attorney

Details Required

Outline of the agreement
Titles and roles
Logistics, Capital and Management
Terms of engagement
Details of capital raised (by founders and investors)
Ownership details (in the company)
Roles and responsibilities of each of the co-founders
Compensation (salary drawn by each of the co-founders)
Details of exit formality for founders
Dissolution of the firm
Details of dispute resolution
Miscellaneous provisions (assignment of intellectual property rights, non-compete clauses, etc.,)

FAQs
Why is a Founder’s agreement required?

Founder’s agreement is made at the time of the incorporation to avoid ambiguity that may arise in the enterprise in future. It also sets up the expectations and goals of all the co-founders by assigning each of them a specific role and responsibility towards the betterment of the enterprise.  

Can’t we just have an oral agreement?

Founders’ agreement is always better to be in a written format than being an oral contract. It is also important that it is to be drafted with the help of a legal team, which ensures elimination of all the loopholes that can be exploited.

Do Founders have to pay for their shares?

While the process of how much is complex and needs you to have a conversation among yourselves, the answer is simple- Yes. Founders must pay for their own stock shares to remain compliant under company laws and corporate statutes.

Is a founders agreement legally binding?

A founders' agreement is a legally binding contract, usually in writing, that outlines the roles, rights, and responsibilities of each owner in a business.

What is the importance of Founders agreement?

It helps to prevent and settle disputes resulting from differences amongst founders. It clearly lays down the roles and responsibilities of the respective founders and establishes a robust system of management and dispute avoidance and settlement.

Get Started.
Talk to an expert.
Simply enter your details and our legal expert will contact you to get started.
Looks good.
Our counsel will contact you shortly.
Your details have been submitted. We are getting the best legal advisor for you.
Oops! Something went wrong while submitting the form.
Related blogs
Curated knowledge from Legex Insights to help you learn
View All Blogs
Making legal work efficient, effective and empowering.
Save more and work Faster
We optimise legal operations to help you save >30% on legal fees while making processes 2x faster to stay ahead in business.
Relationship oriented
Our work spans law, compliance, audit, accounting & more, giving you one-point access to manage legal operations.
Faster growth
We help merge legal operations with business so that legal diligences becomes an instrument to analyse, learn and grow.
Comprehensive coverage
We leverage learning and knowledge across practices and services to provide most efficient solution and advisory.
Use and Reuse legal models
We build models for reiterative legal processes suited to your industry, so you can reuse them, save cost and work faster.
An experience
people
love to talk about.
Testimonial Image

"A culture of authenticity is about being genuine—and genuinely caring. Legex, with its expert team, cares about our business and their regular advisory help us grow, every day."

Shreya Mangeshkar

Triveni hotels
Thousands of scaling businesses love us