Co-Founder Agreements

Company founders, at a very early stage of business, in fact even before incorporation, should enter into an agreement which governs the nature and functioning of their business. This is extremely important especially for businesses which are starting to operate but has not been incorporated yet. After incorporation, many of the issues discussed here will be taken care of by the incorporation documents such as Articles of Association. The purpose of the agreement is to make the understanding the co-founders have regarding the functioning of their company and relationship and obligation between co-founders legally binding through a formal written agreement. Such an agreement is called the co-founder’s agreement.  ONE PERSON COMPANY REGISTRATIONS The formation of such an agreement requires an open discussion between the partners regarding their apprehensions, fears, outlook, aspirations and all arrangements involving the startup. The objective of the agreement is to minimize the

Key Terms of the Agreement   Equity ownership One of the most important terms of the Agreement is determining the proportion of equity ownership of each of the co-founders of the company. The equity ownership of the co-founders of the company is determined taking into consideration multiple factors such as the monetary investment,  experience, existing intellectual property, know-how and network in the industry. Also, the equity ownership is pertinent to ascertain the voting rights that the co-founder may exercise.  Public Limited Company Significant Questions: How much money is being invested and at what stage in the life cycle of the company? Is the founder also bringing other intangibles along with the money, such as experience, industry connects and credibility? Vesting One of the important considerations to be taken note of while drafting the Agreement is providing a mechanism to deal with a situation where any of the co-founders exits or is ousted from the comp

FOUNDERS’ AGREEMENT TEMPLATE AMONG THE FOUNDERS OF [PROJECT NAME] The undersigned (each a “Founder” and together with the “Founders”) are collaborating with the purpose of developing together a Business Concept related to the following: [PROJECT NAME] is a [PROJECT DESCRIPTION] Founders agree that all related technology to the Business Concept is also owned by the Founders pursuant to this Agreement (together, the “Business Concept and Technology”).  As the Business Concept is further developed, Founders intend to transfer the Business Concept and Technology to either a California or Delaware Corporation that shall be formed by the Founders (the “Company”) upon the earliest of the following circumstances: [WHEN THE PROJECT WILL BECOME A COMPANY]  Nidhi Company What is a founders agreement? A founders agreement is a document, involving a company with two or more founders, specifying the details of the development of the company, such as the share of ownership and guara