Startup ecosystem · Incorporation
Founders' agreement: what every co-founder relationship needs in writing
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Facts
A founders' agreement is a private contract between co-founders, separate from the company's legal documents. It governs: equity split rationale, vesting schedule (standard: 4 years, 1-year cliff), IP assignment to company, non-compete and non-solicitation, decision-making authority, and what happens if a founder exits.
Provisions and law
- Indian Contract Act 1872 | Companies Act 2013
Analysis
The most common startup failure point is a co-founder dispute. 65% of co-founder splits result in legal action or company shutdown. A founders' agreement prevents this, or at least makes resolution faster. Vesting is non-negotiable: Even if you trust your co-founder completely, every investor will require vesting. Structure it before they ask.
Conclusion
- Equity split, and the rationale (so it can be defended later)
- Vesting, 4-year / 1-year cliff, acceleration on acquisition
- IP assignment, all IP created for the startup belongs to the company, not the founder
- Exit clause, leaver provisions (good leaver vs bad leaver definitions)
- Decision rights, who has final call on product, hiring, finance
A Savvy can do this for you
LLP agreement filing, Form 3
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