As the name suggests, the Founder agreement is an official agreement signed in between theco-Founders of the company. This agreement states the responsibilities, ownership and initial investments of co-Founders. This mainly helps the Founders of the company to resolve disputes, if any, among themselves in future.
In other words, it is basically an agreement between all the Founders of a company for a better understanding among themselves. Agreements like these help to avoid any sort of disputes in the future. These types of agreements help the Founders to be on the same page and work mutually for the benefit of the entire company.
There are many benefits of uploading the Terms of Use Agreement in a website or mobile application. Let us have a look at all these benefits:
| Serial No. | Clause | Content |
|---|---|---|
| 1 | Execution date | The Founders’ agreement provides the execution date which is normally done immediately after the company is formed. |
| 2 | Founders shareholding | The Founders’ agreement defines the Founders’ current equity percentage. The Founder shareholding gives us the complete data about each and every Founder’s equity percentage. |
| 3 | Dispute resolution | Dispute resolution mechanism. |
| 4 | Founders vesting schedule | It further defines the Founders vesting schedule and released shares. Generally Founders keep3 or 4 years as vesting schedule. |
| 5 | FounderNon compete and Non solicitation clause | Non-compete and non-solicitation in case of termination of Founder employment. |
| 6 | Death of any Founder | If a Founder dies, then the clause with regard to vested or non vested shares will be provided. |
| 7 | Good leaving or Bad leaving | Treatment of vested or non vested shares in both the scenarios. Good leaving is used when the Founder leaves the company for some good reasons. On the other hand, bad leaving is used when the Founder leaves the company for some bad reasons. The definition of “reason” should be defined in the agreement. |
| Dos | Don'ts |
|---|---|
| Always execute the Founders agreement on stamp paper of appropriate value. | Some Founder is of the view that since they are executing the shareholders agreement, so theFounder agreement is not required. This understanding is not correct. |
| Do create the Founders agreement in Counter parts and let have each of the Founder keep the original copy. | In case some co-Founder joins at the later stage, do not miss to amend the agreement and add his name as well. |
| Do also add the clauses with regard to intellectual property assigned to the company. | Do not miss to mention about your Founders agreement in your future shareholders agreement as well. |
No. Only the Founders who are the shareholders and the promoters of the company need to execute Founder agreement.
You should purchase 100 rupees stamp paper and that will be used for the Founders agreement. However, you must have to procure counter parts for each of the founder.
In the case of a good leaving,the entireVested shares will be with the goingFounder and all the non invested shares will be distributed among the existing founders. In the case of a bad leaving, all the shares, including vested and non vested shares, will be transferred to the existing Founders.
In such a case, you must refer to the Founders agreement. You can send legal notice to the ex-Founder who has left the organisation and joined the competition.
It is not at all necessary to include any witness in the Founders agreement. However, it is up to the Founders of the company whether they wish to keep a witness or not, in the agreement.
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