Founders Agreement

A Founders Agreement is a short contract between the co-founders of a startup that records how equity will be split, what each founder is responsible for, how shares vest over time, how major decisions are made and what happens when a founder wants to leave.

Company / proposed company name*

First founder name*

First founder equity (%)*

Second founder name*

Second founder equity (%)*

Vesting period (years)*

Cliff period in months (optional, for example 12)

Price per share for unvested shares when a founder leaves (optional)

Roles and responsibilities of each founder*

Effective date*

Format:

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FOUNDERS AGREEMENT This Agreement is executed on [effective_date] between [founder_1_name] and [founder_2_name] (together "the Founders"), in connection with [company_name] (the "Company"). 1. EQUITY SPLIT The Founders agree to hold equity in [company_name] in the following proportion: [founder_1_name] - [founder_1_equity]%; [founder_2_name] - [founder_2_equity]%. 2. ROLES AND RESPONSIBILITIES [roles_description] 3. VESTING 3.1 Each Founder's equity shall vest over a period of [vesting_period_years] years from the date of this Agreement, in equal monthly instalments, unless the Founders agree otherwise in writing. 3.2 If a cliff period is stated below, no equity vests before the end of that period. At the end of the cliff period the equity for that period vests at once, and the balance continues to vest monthly. Cliff period (months): [cliff_months] 3.3 If a Founder leaves the business of the Company, by resignation, removal or otherwise, before their equity has fully vested (the "Leaving Founder"), the Leaving Founder keeps only the vested portion. The Leaving Founder shall transfer the unvested portion to the remaining Founder(s), in proportion to their holdings, or to a person they nominate, at the price stated below or, if no price is stated, at the lower of the face value of the shares and the price the Leaving Founder paid for them. Where the Founders so agree, the unvested shares may instead be bought back by the Company, but only in the manner permitted by the Companies Act, 2013. Price per share for unvested shares: [unvested_share_price] 3.4 Any transfer under this clause is subject to applicable law, including pricing rules under income-tax and foreign exchange law. Each Founder shall sign the transfer instruments and do all acts needed to give effect to this clause, and the Founders shall ensure that the Company's articles of association reflect it. 4. INTELLECTUAL PROPERTY Each Founder agrees that all intellectual property created by that Founder, alone or with others, for the business of the Company, whether before or after the date of this Agreement, shall belong to the Company. Each Founder shall, when asked (and, if the Company is not yet incorporated, promptly after its incorporation), execute a written deed assigning those rights to the Company, stating the rights assigned and that the assignment is worldwide and for the full term of the rights. 5. DECISION MAKING Major decisions affecting the Company shall require the mutual written consent of both Founders, unless otherwise agreed in a separate shareholders' agreement. 6. EXIT If a Founder wishes to exit, the remaining Founder(s) shall have a right of first refusal to purchase the exiting Founder's vested equity at a mutually agreed or independently valued price. IN WITNESS WHEREOF the Founders have executed this Agreement on the date first written above. [founder_1_name] [founder_2_name]

Founders Agreement: what it is

When you need this document

Two people are starting a company together and want the equity split agreed in writing before work begins.
Co-founders have already incorporated but never recorded vesting or exit terms.
An investor or incubator asks whether the founders have a signed agreement on equity and roles.
One founder is contributing money and the other mainly time or technology, and the split needs to reflect that.

What it covers

The two founders' names and the company or proposed company the agreement relates to.
The equity percentage each founder will hold, and each founder's roles and responsibilities.
Vesting in equal monthly instalments over the chosen number of years, with an optional cliff period.
If a founder leaves early, a duty to transfer the unvested shares to the remaining founder or a nominee at the stated price, or a buy-back by the company only as the Companies Act, 2013 permits.
An agreement that intellectual property created for the business belongs to the company, followed by a written assignment deed.
Mutual written consent for major decisions, and a right of first refusal over an exiting founder's vested equity at an agreed or independently valued price.

How to fill, sign and use it

Discuss and agree the equity split, roles, time commitment and vesting period before filling anything in.
Fill in the form on this page and check that the two percentages and the roles reflect what you actually agreed.
Have an advocate review the draft before signing. This template is short, covers only two founders, and leaves out terms such as good and bad leaver pricing, deadlock resolution and founder time commitment, which usually need to be added and matched to the company's articles.
Print on stamp paper or pay e-stamp duty as an agreement under your state's stamp law.
Both founders sign and date it, ideally with two witnesses.
After incorporation, have the company's articles of association and any shareholders' agreement updated so that vesting and transfer terms bind the company as well.

Documents to attach or keep with it

Certificate of incorporation and articles of association, if the company already exists.
Cap table showing current shareholding.
Intellectual property assignment from each founder to the company, if signed separately.

The law behind it

A founders agreement is a contract under the Indian Contract Act, 1872 and is binding between the founders who sign it. Shareholding, share transfers and buy-backs in the company itself are governed by the Companies Act, 2013 and the company's articles. Vesting or transfer restrictions that are not reflected in the articles may be difficult to enforce against the company, which is why the articles should mirror this agreement. Stamp duty is set by each state.

Common mistakes to avoid

Agreeing an equal split by default without discussing contribution, time commitment and future roles.
Assuming vesting operates automatically when the company's articles and share records say nothing about it.
Not signing the written intellectual property assignment deed this agreement calls for, so code, designs or brand created before incorporation stay with the founder.
Leaving out what happens if founders disagree, since this draft requires mutual consent for major decisions and has no deadlock mechanism.

Founders Agreement: frequently asked questions

Is a founders agreement legally binding in India?

Yes, once signed it is a contract between the founders under the Indian Contract Act, 1872. It should also be stamped, since an unstamped agreement may not be admitted in evidence until duty and penalty are paid. Its weak point is enforcement against the company, which is a separate legal person. To make vesting and transfer restrictions effective at company level, the articles of association should contain matching provisions.

How does founder vesting work in India?

Founders often receive shares upfront, and the agreement provides that if a founder leaves early, the unvested portion is transferred to the remaining founders or a nominee, or bought back by the company where the law permits, often at a nominal value. This is sometimes called reverse vesting. The mechanism must work within the Companies Act, 2013, so an advocate or company secretary should structure it.

Should a founders agreement be signed before or after incorporation?

Either works. Signing before incorporation records the deal while everyone agrees, and this template allows a proposed company name. After incorporation, the terms should be carried into the articles and, where there are investors, into a shareholders' agreement. Do not wait until a dispute arises.

Does a founders agreement need stamp paper or notarisation?

It should be stamped as an agreement under the stamp law of the state where it is signed; rates differ by state. Notarisation is not required by law. Registration is not needed unless the agreement itself transfers immovable property, which a founders agreement normally does not.

Last updated 11 October 2026.

General information on Indian law, not legal advice for your situation. Stamp duty, registration and fees differ by state, so check with the local office or an advocate before you rely on it.

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