Sign this before there is anything worth arguing about. If the company is not yet incorporated, execute it among the founders personally and have the company ratify and adopt it at its first Board meeting. Execute on stamp paper of the value prescribed in the State of execution.
Founders’ Agreement
Among the founders of [COMPANY NAME]
Sign this before there is anything worth arguing about. If the company is not yet incorporated, execute it among the founders personally and have the company ratify and adopt it at its first Board meeting. Execute on stamp paper of the value prescribed in the State of execution.
THIS FOUNDERS’ AGREEMENT is made at [PLACE] on [DATE]
AMONG:
(1)[FOUNDER 1], [son / daughter of ______, aged ______ years], residing at [ADDRESS], holding PAN [PAN];
(2)[FOUNDER 2], [particulars]; and
(3)[FOUNDER 3], [particulars],
(each a "Founder" and together the "Founders"), and [COMPANY NAME], [a private limited company incorporated under the Companies Act, 2013 bearing CIN ______, having its registered office at ______ / a company proposed to be incorporated] (the "Company").
Recitals
A.The Founders have agreed to establish and carry on together the business of [DESCRIBE THE BUSINESS] (the "Business").
B.The Founders wish to record the basis on which they will hold equity in the Company, the roles and responsibilities each will assume, the manner in which decisions will be taken, and what happens if a Founder leaves.
NOW THEREFORE the Founders agree as follows:
1. The Company and the Business
1.1The Founders shall incorporate the Company as a private limited company within [NUMBER] days of the date of this Agreement, or carry on the Business through the Company, with its registered office at [CITY].
1.2The Business of the Company is [DESCRIBE PRECISELY — the products or services, the market and the customers]. The Company shall not enter into any other line of business without the unanimous consent of the Founders.
1.3Each Founder shall subscribe to the shares set out in Schedule 1 at par, shall pay the subscription amount within [NUMBER] days of incorporation, and shall provide the documents required for incorporation and for allotment.
1.4On incorporation the Founders shall procure that the Company ratifies and adopts this Agreement, that the articles of association are amended to give effect to it, and that this Agreement is recorded in the minutes of the first Board meeting.
2. Equity and Contributions
2.1The equity of the Company shall be held by the Founders in the proportions set out in Schedule 1. The Founders confirm that those proportions reflect the contributions recorded in Schedule 2 and that no Founder has any claim to a different proportion.
2.2Capital contributions. Each Founder shall contribute the amount set out in Schedule 2 by the date stated. A Founder who fails to contribute by that date shall, unless the other Founders agree otherwise in writing, have his or her shareholding reduced proportionately, and the shortfall may be contributed by the other Founders or by a third party admitted with the consent of the other Founders.
11 more pages in the Word file
Preview of the first page. Highlighted fields are the ones you fill in — they appear the same way in Word. Scroll the preview to read on; the full document runs to 12 pages.
These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
The value of this document is entirely in having agreed it before there is a dispute. Founders who postpone it until the first fundraise end up negotiating vesting and leaver terms with a term sheet on the table and an investor watching — the worst possible moment. It costs almost nothing to sign at incorporation.
A three-way equal split is fine if the contributions are genuinely equal and will remain so. Where one founder is full-time and another is not, where one has put in money and another has not, or where one joined a year later, the split should reflect that. Schedule 2 exists to record why the split is what it is, so that the reasoning survives the memory of it.
Without vesting, a founder who leaves in month four keeps a third of the company forever, and every future investor will require the problem to be fixed retrospectively — which requires that founder’s cooperation, which is exactly what will not be forthcoming. Four years with a one-year cliff is the market standard. Credit for time already served is negotiable and should be recorded in Schedule 1.
A definition of Bad Leaver that includes any resignation gives whoever controls the board the power to make any departing founder a bad leaver by making the job intolerable. The Good Reason limb in Clause 5.3 is the counterweight and should not be dropped. Equally, a definition confined to criminal conviction protects nobody. The clause as drafted sits between the two.
Clause 5.6 flags the constraint. A company may only buy its own shares within the limits of Sections 68 to 70 of the Companies Act, 2013 — out of free reserves or securities premium, within the prescribed percentage limits, subject to a debt-equity test, and not more than once a year. An early-stage company usually has neither reserves nor premium, so the practical route is a purchase by the continuing founders or by a nominee. Decide in advance who funds it.
Clause 6.5 and Schedule 4 exist because in almost every early-stage company something material sits in a founder’s personal name — the domain, the repository, the cloud account, the app store listing, the trade mark application. Move them to the company within thirty days and keep the register updated. Investors will ask, and a founder who has left with the domain registered to their personal email is a genuine emergency.
Warranty 6.4 addresses the most common intellectual property defect at seed stage: code or designs created while a founder was employed elsewhere, using that employer’s equipment or time. Employment contracts routinely assign such work to the employer. Where a founder has any doubt, take advice before the fundraise rather than warranting around the problem.
Clause 7.4 states the position plainly. Section 27 of the Indian Contract Act, 1872 voids restraints of trade, and Indian courts do not enforce non-competes operating after employment ends. Restrictions during the engagement, confidentiality, non-solicitation and intellectual property assignment all work. If a departing co-founder starting a competitor is the risk that keeps you awake, the answer is the leaver provisions in Clause 5, not a non-compete that will not be enforced.
Clause 8.5 resolves deadlock decisively and brutally. It favours whoever has money, because the offeree must either buy at the offeror’s price or sell at it. Where founders have very different personal financial positions, it is not fair, and a valuation-based buy-out with a payment schedule is the better mechanism. Decide deliberately; do not include it because it appears in templates.
Clause 10.2 records what actually happens on a priced round: the shareholders’ agreement supersedes this document on everything it covers. That is normal. Keep this agreement alive for what the investor agreement does not address — the allocation of roles among founders, the deadlock mechanism, and the internal contribution arrangements.
Clause 11.2. Vesting, leaver rights and transfer restrictions bind a transferee only if they are in the articles of association of the company. The agreement alone binds the founders as a contract. Amend the articles and file the amendment.
Duty is State-specific and usually charged as an agreement. Execute on stamp paper purchased in the State stated as the place of execution, and take two witnesses. If founders sign in different States, assume the higher duty applies.
Reflects Indian law current as of {{DATE OF USE}}. Have this agreement reviewed by counsel, particularly the vesting, leaver and buy-back mechanics, which interact with company law limits.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, company secretary, or chartered accountant as relevant) before you rely on it.