The Co-Founder Agreement is a crucial document used when two or more individuals join forces to establish and operate a business venture in India. This agreement should be executed before or during the early stages of company formation to prevent future disputes and misunderstandings. It addresses essential aspects such as equity ownership, roles, responsibilities, decision-making processes, and exit mechanisms. The document must comply with Indian legal requirements, particularly the Indian Contract Act, 1872, and the Companies Act, 2013. A well-drafted Co-Founder Agreement is especially important in the Indian business context, where the startup ecosystem is rapidly growing and founder disputes are increasingly common. The agreement serves as a roadmap for the business relationship and provides clear mechanisms for handling various scenarios that may arise during the company's lifecycle.
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1. Parties: Identification and details of all co-founders entering into the agreement
2. Background: Context of the agreement, including brief company history and purpose of the arrangement
3. Definitions: Definitions of key terms used throughout the agreement
4. Roles and Responsibilities: Detailed description of each co-founder's position, duties, and areas of responsibility
5. Commitment and Time Dedication: Expected time commitment and exclusivity requirements for each co-founder
6. Equity Distribution: Initial shareholding structure and any vesting schedules
7. Capital Contribution: Details of initial and future capital contributions from each co-founder
8. Decision Making: Process for making key business decisions and voting rights
9. Intellectual Property Rights: Ownership and assignment of IP created before and during the business
10. Confidentiality: Obligations regarding confidential information and trade secrets
11. Non-Compete and Non-Solicitation: Restrictions on competitive activities and solicitation of employees/customers
12. Exit Provisions: Procedures for founder exit, including voluntary departure and termination
13. Death and Incapacity: Procedures in case of death or incapacity of a co-founder
14. Dispute Resolution: Process for resolving disputes between co-founders
15. General Provisions: Standard legal clauses including governing law, notices, and amendments
1. Salary and Compensation: Terms of founder compensation when founders draw salaries - used when founders plan to take regular compensation
2. Board Composition: Structure and operation of the board of directors - relevant for larger startups or when planning significant scale
3. External Investment: Procedures for accepting external investment and dilution - important when seeking immediate external funding
4. Family Succession Rights: Rights of family members in case of founder death/incapacity - relevant for family-oriented businesses
5. International Operations: Provisions for international business activities - needed when operating across borders
6. Technical Contribution: Specific technical responsibilities and ownership - crucial for technology-focused startups
7. Founder Illness and Leave: Provisions for extended illness or leave - important for founders with health concerns or other commitments
1. Schedule 1 - Business Plan: Detailed business plan including market analysis, strategy, and financial projections
2. Schedule 2 - Vesting Schedule: Detailed equity vesting timeline and conditions for each founder
3. Schedule 3 - Initial Capital Contributions: Itemized list of cash and non-cash contributions from each founder
4. Schedule 4 - Pre-Existing IP: List of intellectual property owned by each founder prior to the agreement
5. Schedule 5 - Roles and Responsibilities Matrix: Detailed breakdown of specific duties and accountability areas
6. Schedule 6 - Key Performance Indicators: Metrics for evaluating founder performance and contribution
7. Appendix A - Share Transfer Forms: Template forms for any future share transfers
8. Appendix B - Confidentiality Agreement: Detailed confidentiality terms and procedures
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