Founders Agreement Drafting for Startups in India
Put equity, roles, vesting, IP ownership and exit terms between co-founders in writing before disagreements start.
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A founders agreement is a written contract between the co-founders of a startup that records who owns what, who does what and what happens if someone leaves. It is meant for two or more people building a venture together, ideally signed before or at the time the company is incorporated. It usually covers equity split, roles, vesting and cliff, assignment of intellectual property to the company, decision-making, deadlock handling, exit and buy-back, and confidentiality. Our team drafts it around your actual arrangement, so that the paper reflects what you have agreed and not a generic template.
Who provides this service: our legal documentation team, with anything that requires an advocate handled through a practising advocate.
Who Needs Founders Agreement?
- Two or more co-founders who are about to incorporate or have recently started a company
- Founders who have already been working together informally on a verbal understanding
- Technical and business founders where one partner built the product before the company existed
- Startups preparing to approach angel investors or venture funds, who will review founder arrangements
- Founders bringing in a new co-founder or advisor with a promise of equity
Key Benefits
- Equity split, vesting and cliff written down so every co-founder knows what is earned over time and what is not
- IP created by the founders is assigned to the company, which investors and acquirers usually look for first
- Clear roles and decision rights, with a defined way to break a tie when two founders disagree
- Exit and buy-back mechanics agreed while relationships are good, instead of negotiated during a dispute
- Confidentiality and non-compete wording kept reasonable, so it is more likely to hold up if ever tested
- A document that fits alongside your later shareholders agreement and your constitutional documents
How It Works
Discuss the arrangement
We speak with the founders about contributions, time commitment, money brought in, intended roles and long-term expectations, and note every point on which the founders have not yet agreed.
Settle equity and vesting
We explain how equity split, vesting schedule, cliff and leaver treatment work in practice, and help you choose terms that reward continued contribution rather than a handshake on day one.
Draft the agreement
Our team prepares the draft with roles, decision-making, deadlock steps, IP assignment, confidentiality, non-compete, exit and buy-back clauses, plus governing law and dispute resolution suited to your situation.
Review and negotiate
Each founder reviews the draft, raises concerns and suggests changes. We revise until the wording matches the real deal, and we flag clauses that may be hard to enforce or that a future investor may question.
Stamp and execute
The final agreement is printed on stamp paper of the value required in your state, or stamped through the state process, and signed by all founders with witnesses where appropriate.
Align with incorporation records
We check that the agreement is consistent with the company memorandum, articles and share allotment, and note where a later shareholders agreement or an employee option plan will need to build on it.
Documents Required
- PAN and address proof of each founder
- Details of the company or proposed company, including name and incorporation documents if already registered
- Agreed or proposed shareholding of each founder and any capital contributed so far
- Description of each founder role, responsibilities and expected time commitment
- List of existing intellectual property, code, brand names, domains or prototypes created before incorporation
- Details of any prior understanding, term sheet or email trail between the founders
- Existing agreements with advisers, early employees or investors, if any
- Details of other businesses or employment of the founders that may overlap with the startup
Timeline and Fees
Indicative timeline: Indicative range of one to two weeks for drafting and review, depending on how many points the founders still need to agree and on state stamping and execution arrangements.
Professional fee: Professional fees depend on the number of founders, the complexity of equity and vesting terms and how many rounds of revision are needed. Stamp duty varies by state and is paid at actuals. Contact our team for a written quote. Anything the law requires an advocate to sign or appear for is handled through a practising advocate.
What Can Go Wrong if This Is Missed or Done Incorrectly
- Without a written agreement, a founder who leaves early may keep a full equity stake despite contributing little afterwards
- Unclear IP ownership can delay or derail a funding round or acquisition when investors ask who owns the product
- Silence on deadlock and exit often turns a business disagreement into a prolonged dispute
- An insufficiently stamped agreement may face difficulty being admitted as evidence until the deficiency is cured
Frequently Asked Questions
Do co-founders really need a founders agreement?
If two or more people share ownership of a venture, writing the terms down is sensible, even among close friends. Memory fades and circumstances change. A signed agreement turns assumptions about equity, roles and exit into rules, which saves time and relationships later and gives investors a clearer picture.
When should a founders agreement be signed?
Ideally before or at incorporation, when everyone is still aligned and nothing material has been built. It can still be signed later, but the longer you wait the more work has been done on informal terms, and the harder it becomes to settle past contributions and IP ownership fairly.
What is vesting and why does it matter for founders?
Vesting means a founder earns the right to their shares gradually over a set period, often with an initial cliff before any shares vest. It protects the company if a founder leaves early, because unvested equity can be returned. Investors commonly ask to see some form of founder vesting.
Is a founders agreement the same as a shareholders agreement?
No. A founders agreement is usually an early-stage document between the founders about their roles, equity and exit. A shareholders agreement is typically signed between the company and all shareholders, often including investors, and covers wider matters such as board rights and transfer restrictions. Many startups use both.
Can a non-compete clause in a founders agreement be enforced in India?
Indian courts look closely at restraints on trade, and a broad clause that stops someone earning a living may not be enforceable after exit. Restrictions during the founder involvement are treated more favourably. We draft reasonable, narrowly worded terms and explain the limits clearly.
Can the agreement be changed after it is signed?
Yes, if all founders agree in writing. Changes are made through an amendment or a fresh agreement, and the amendment may need to be stamped as well. When new founders join or investors come in, the earlier agreement is usually updated or replaced to stay consistent.
Official Sources
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Disclaimer: The information on this page is for general informational purposes only and does not constitute professional legal, tax or compliance advice. Requirements vary by situation. Please consult a qualified CA or CS for advice specific to your needs. Government fees and timelines are subject to change; verify with the relevant authority before proceeding.