The Founders Contract is a crucial document required when two or more individuals or entities come together to establish a business venture in India. It serves as the foundational agreement that governs the relationship between founders, protecting their interests while ensuring clear accountability and structure in the business. This document is particularly important in the Indian business context, where it must comply with the Companies Act 2013, Indian Contract Act 1872, and other relevant legislation. The contract typically addresses key aspects such as equity distribution, voting rights, decision-making processes, intellectual property rights, and exit mechanisms. It's essential to have this agreement in place before commencing business operations or seeking external investment, as it provides clarity and helps prevent future disputes between founders.
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1. Parties: Details of all founding members entering into the agreement
2. Background: Context of the agreement, including brief description of the business venture and purpose of the agreement
3. Definitions: Key terms used throughout the agreement and their meanings
4. Business of the Company: Detailed description of the business venture, its objectives, and scope
5. Roles and Responsibilities: Specific roles, duties, and responsibilities of each founder
6. Capital Contribution: Details of initial and future capital contributions by each founder
7. Shareholding Structure: Distribution of shares among founders and vesting schedules if applicable
8. Management and Decision Making: Governance structure, voting rights, and decision-making processes
9. Intellectual Property Rights: Ownership and protection of IP created before and during the venture
10. Confidentiality: Obligations regarding confidential information and trade secrets
11. Non-Compete and Non-Solicitation: Restrictions on competitive activities and employee solicitation
12. Exit Provisions: Procedures for founder exit, including share transfer and buyout terms
13. Dispute Resolution: Process for resolving disputes between founders
14. Term and Termination: Duration of the agreement and conditions for termination
15. General Provisions: Standard boilerplate clauses including notices, amendments, governing law
1. External Investment: Include when the company plans to seek external funding, covering terms for dilution and investor rights
2. Founder Remuneration: Include when founders will draw salary or other compensation from the company
3. Dead Lock Resolution: Include for companies with equal shareholding to address potential voting deadlocks
4. Family Succession Rights: Include when founders want to specify rights of family members in case of death or incapacity
5. International Operations: Include when business operations are planned across multiple countries
6. Technology Transfer: Include when specific technology or technical knowledge is being contributed by founders
7. Pre-existing IP License: Include when founders are licensing their pre-existing IP to the company
1. Schedule 1 - Business Plan: Detailed business plan including market analysis, financial projections, and growth strategy
2. Schedule 2 - Initial Shareholding: Detailed breakdown of share allocation, share classes, and any special rights
3. Schedule 3 - Founder Details: Complete information about founders including contact details, qualifications, and experience
4. Schedule 4 - IP Schedule: List of all intellectual property being contributed by each founder
5. Schedule 5 - Vesting Schedule: Detailed vesting terms and conditions for founder shares
6. Schedule 6 - Reserved Matters: List of decisions requiring special majority or unanimous consent
7. Appendix A - Share Valuation Methodology: Agreed method for valuing shares for future transfers or exits
8. Appendix B - Confidential Information: Detailed list of what constitutes confidential information
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