Founders’ Agreement


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A Founders’ Agreement is an official contract that is signed and executed 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/starting stage of an enterprise as it will lay out the responsibilities and roles of each of the co-founders.

Essentials of any founders’ agreement are:

  • Meaning of the business
  • 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.,)

Founders’ agreement is always best 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 flaws that can be exploited.

Advantages of Founders Agreement

It gives clarity between the founders. There are certain matters which are not discussed between the co- founders. Thus, this agreement provides clarity of doubts, decisions and terms.

The roles and duties of co-founders are clearly segregated and defined through founders agreement.

Procedure of Founders Agreement?

The registration in GST is done on the basis of PAN and State specific. Supplier has to register in each such State or Union territory from where he generates supply if he fulfills any of the following conditions:

A well efficient lawyer from our team shall contact you, and explain you the total process, and will understand the need of Founders Agreement that is to be executed by you.

Once the objectives of the same are clear, the lawyer shall draft a sample Founders Agreement accordingly.

The draft Founders Agreement shall be sent to you, for your review.

The whole process takes around 3-4 working days.


The main reason a Founders Agreement is advised is that it avoids any ambiguity that might arise in the future with respect to the management of the company and business relations between the founders. It is able to identify the prospective risks and complications along with supplying provisions for dealing with the same.

Thus it is always recommended that a written Founders Agreement must be drafted after consulting an expert as per the requirements of the business and understanding of the co-founder.

Prior to entering into a Founders Agreement, the co-founders must undertake a sincere dialogue to create an understanding about issues like ownership, management, remunerations, compensation, investments, the board of directors, etc. It is essential for the founders to be clear which shall then be reflected in the Founders Agreement. The components of the Founders Agreement should be discussed thoroughly to be able to arrive at a detailed and conclusive result.

A well-drafted Founders Agreement helps to avoid situations which may possibly hinder the development and cause uncertainty in the management of the business. Also, a wise investor ensures that during the due diligence, the Founders Agreement is scrutinized.

It is always preferred to approach an expert consultant to assist in the drafting of a Founders Agreement. This ensures that the interest of founders and the business are secured in the best possible manner.