Beginning a new\nbusiness involves a lot of risks. Often two or more people come together to\napportion a startup. There are a lot of formalities that needs to be completed\nwhile launching a startup and a co-founders’ agreement is one of them. Founders\nof startups need not skip this step as this agreement will come to their aid if\nthings do not go the way as planned. A co-founders’ agreement, like all other\ncontracts, helps in navigating the founders day to day operations and also\nhelps in clearing the differences in case of any issue. The\nco-founders’ agreement as a document can be made legally enforceable by just printing\nit on a non- judicial Stamp paper, which must be duly signed by the concerned\nparties with the appropriate stamp duty varying in different states.<\/p>\n\n\n\n
The essentials to be found in any founders’\nagreement are as follows:<\/p>\n\n\n\n
All\nthe founders of startups own a part of the business even though the ownership\nmay be divided based on their investment. Each co-founder agreement must mention\nthe following details:<\/p>\n\n\n\n
The roles and\nresponsibilities of every co-founder are different based on their skills and\ncapabilities. The co-founders must declare their roles and duties in the\nagreement and also lay down the activities of the business for which they will\nbe individually responsible.<\/p>\n\n\n\n
The agreement must name\nthe founders and the company. The name of the business and owners must be\nclearly specified in the agreement.<\/p>\n\n\n\n
Finally, it must be\nclarified as to how long the co-founders’ agreement will remain valid. It is\nnot legally binding to continue working for the business forever, so it is\nsuggested to decide the validity period of the agreement.<\/p>\n\n\n\n
This clause can change\nthe way business changes and grows, but it is better to mention in the clause\nregarding the goals of the company. What products to offer? Or how the business\nwill look to a consumer, a competitor, or an employee?<\/p>\n\n\n\n
To predict how a\ncompany will operate is not legally binding, but it is just a business model to\nbe planned before.<\/p>\n\n\n\n
A provision which prohibits explicitly any founder from soliciting any business information or sensitive information of any client or employee in case he leaves must be revealed in the co-founders’ agreement. This clause prevents any co-founder who leaves the business in the future from duplicating the business idea<\/a><\/strong>.<\/p>\n\n\n\n The co-founders’\nagreement must lay down the rights and liabilities of the founders in case of winding\nup of business. The provision also includes, how the assets and liabilities of\nthe business will be distributed. <\/p>\n\n\n\n Generally, one or more co-founders put in some capital\nin the early stages of the company. The agreement shall specify each founder’s\ncontribution and the basis<\/a> of contribution for example, debt, equity loan etc. <\/p>\n\n\n\n Founders must decide if and when they will take a\nsalary or they will take other forms of compensation other than shares. In this\npart reimbursement of expenses incurred by the individual founders must be\ndecided.<\/p>\n\n\n\n Founders must ensure that in case a founder decides to\nleave and sell their shares than the other founders have an option to purchase those\nshares. These are important as the departing founder can sell their shares to\nan unknown third party.<\/p>\n\n\n\n As disputes regularly arise in co-founder situation,\nit is vital to set out the process of how the differences will be resolved.\nThis may engage a series of steps such as having an informal meeting if no\nagreement can be reached then to have mediation or another alternative dispute\nresolution process.<\/p>\n\n\n\nWinding up of Business<\/h3>\n\n\n\n
Capital and other contributions<\/h3>\n\n\n\n
Remuneration<\/h3>\n\n\n\n
Departure<\/h3>\n\n\n\n
Dispute resolution<\/h3>\n\n\n\n
Exit Clauses<\/h3>\n\n\n\n