Template - Co-Founder's Agreement

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CO-FOUNDERS AGREEMENT

This Co-founders Agreement is executed at [●] [insert place] on [●] [insert date].

BY AND BETWEEN

1. [●] [Insert the name of Co-Founder], residing at [●] [Insert address of Co-Founder],
which expression shall unless it is repugnant to the subject or context thereof, include
their legal heirs, successors, nominees and permitted assignees, of the First Part;
AND
2. [●] [Insert the name of Co-Founder], residing at [●] [Insert address of Co-Founder],
which expression shall, unless it is repugnant to the subject or context thereof, include
their legal heirs, successors, nominees and permitted assignees of the Second Part.
AND
3. [●] [Insert the name of Co-Founder], residing at [●] [Insert address of Co-Founder],
which expression shall, unless it is repugnant to the subject or context thereof, include
their legal heirs, successors, nominees and permitted assignees of the Third Part.
Each of the parties shall be individually referred to as a ‘Co-Founder’ and collectively as the ‘Co-
Founders’.
WHEREAS the Co-Founders are [●] [insert background about how the co-founders know each
other]
WHEREAS the Co-Founders [have started/contemplate starting] work on [●] [insert description
of the business] commenced activities into the field of [●] and allied areas (“Business”) in [●]
[insert approximate time e.g. month and year of commencing activities], carried out or
proposed to be carried out under the name of [●] [specify the brand name which is used for the
business];
WHEREAS the Co-Founders have decided to enter into this agreement to crystallize the terms of
their relationship with one another.
IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:

1. PURPOSE
1.1. The Co-Founders have identified a prospective business opportunity in the area in which
the Business is planned and have agreed to work together [until/for a period of] [●]
[mention a milestone, e.g. completion of the first phase of the product or launch of the
website, or a timeline in months or years] (Initial Objective or Initial Timeline) from
the effective date of [●].
1.2 Any costs incurred by any of the Co-Founders, personal loans of the Co-Founders or their
friends, family, relatives or any angel investor to the Business will be reimbursed from the
revenues if any. Profits of the Business shall be shared in the following ratio:
● [Insert name of Co-Founder]: [●] [Profit ratio]
● [Insert name of Co-Founder]: [●] [Profit ratio]
● [Insert name of Co-Founder]: [●] [Profit ratio]
1.3 The Co-Founders shall jointly participate in the management and operational decision-
making processes of the Business, and in the execution of the business strategy, as
explained in this agreement.
2. TERM AND VALIDITY OF THIS AGREEMENT
2.1 This Agreement shall govern the relationship between the Business and the Co-Founders.
If the Co-Founders agree to carry on the Business in the long term, they shall, [as soon as
it is feasible] organize themselves into a formalized business entity such as a partnership,
LLP, company or a registered non-profit by entering into appropriate documentation and
performing necessary statutory filings. The actions under this clause shall be taken latest
by [the realization or completion of the Initial Objective or the Initial Timeline].
2.2 Unless a Co-Founder is dismissed or retired as explained later in this agreement or has
stopped working for the Business, the Co-Founders shall ensure that the commercial
understanding in this agreement (particularly the provisions with respect to the economic
interest and capital contribution) is factored into the documentation executed for any
formal business structure that is subsequently adopted.
2.3 Until the actions described above are completed, this agreement shall continue to remain
valid and govern the relationship between the Co-Founders.
2.4 Any amendments to this document or admission of new Co-Founders shall only be made
in writing.
3. RESPONSIBILITIES OF THE CO-FOUNDERS
3.1 The Co-Founders will share a general responsibility for the reputation and the economic
growth of the business. Currently, the specific responsibilities of the Co-Founders are as
follows:
[Insert name of Co-Founder]
[●] [Mention responsibilities]1

[Insert name of Co-Founder]


[●] [Mention responsibilities]

[Insert name of Co-Founder]


[●] [Mention responsibilities]

3.2 The above allocation is not strict and responsibilities on some of the above areas may be
shared with other Co-Founders. Wherever necessary, each Co-Founder shall co-operate
with each other and provide necessary help to other Co-Founders towards discharging
their specific responsibility, for the overall benefit of the Business.
3.3 The roles mentioned above may be modified from time to time depending on the needs of
the Business and based on mutual understanding. The modification may even be recorded
or evidenced by electronic communication.
3.4 The Co-Founders may identify and create appropriate processes for decision-making in a
meeting where all Co-Founders are invited, and at least the majority are present. They
may be voting to appoint one of them as a Chief Executive Officer (CEO) to bear
responsibility for day-to-day decision-making and assume other responsibilities of a
CEO.
4. MUTUAL RIGHTS AND OBLIGATIONS OF THE CO-FOUNDERS
In capacity as a co-founder of the business, the New Co-Founder shall be expected to
participate in team discussions and development of plans. Co-Founder will have the
following rights:
● The right to be represented as a co-founder of the Business in all communications
and publicity materials.
● Right to participate in discussions pertaining to the company.
● Right to be involved in developing future expansion plans and strategies.
● Right to inspect the books of accounts.
● Right to be treated fairly.
● Right to have the terms of this agreement incorporated into a subsequent business
structure.
[specify any other general responsibility you contemplate.]
5. CAPITAL CONTRIBUTION AND PROFIT-SHARING
5.1 The Co-Founders shall contribute the following amounts as their share of capital in the
business:
● [Insert the name of Co-Founder]: [●] [Mention capital contribution]
[Insert the name of Co-Founder]: [●] [Mention capital contribution]
● [Insert the name of Co-Founder]: [●] [Mention capital contribution]
5.2 Any excess amounts of capital beyond the limits above shall be expressly acknowledged
by the other Co-Founders in writing. However, the capital contribution shall not alter the
economic interest of the Co-Founder in the Business.
5.3 Vesting Schedule: While any income that is earned may be shared in the manner
specified above, economic interest or ‘share in the ownership’ of the business shall vest
periodically in the Co-Founders as per the following schedule:

TIME PERIOD (IN MONTHS) Percentage of ownership interest that


will vest
6 25% of total economic interest
12 50% of total economic interest
18 75% of total economic interest
24 100% of total economic interest
5.4 Impact of Vesting: Economic interest in the business that has not vested in the Co-
Founders may be held by a separate entity;
Or;
Vesting: The Co-Founders agree that if they exit or are fired or dismissed from the
business within the terms of this agreement before their economic interest has completely
vested, the unvested portion shall be relinquished back to the business. All Co-Founders
shall co-operate and perform all actions necessary to respect this understanding.
5.5 Upon incorporation of the Business into an LLP or company, a minimum amount of
capital contribution may be necessary under the law. The Co-Founders agree to contribute
necessary amounts as their capital contribution towards the Business.
6. RESTRAINT ON COMPETING BUSINESS
6.1 The Co-Founders shall be expected to involve herself full-time in the carrying out of
their responsibilities towards the Business and [will not carry out any other activity for
remuneration or charity (irrespective of whether it competes with the Business)]
O
R
[will not carry out any competing activity that conflicts with their duties, but may carry
out part-time occupations or jobs so as to earn upto [●] [specify amount earned at the
current job or a minimum salary that is acceptable]]
without consent from the other Co-Founders.
7. PROFIT-SHARING, SALARY AND DRAWINGS
7.1 Unless all the Co-Founders decide by consensus to share the profits equally, profits will
be ordinarily shared in the ratio of their economic interest in the Business.

7.2 Loans provided to the business from any of the Co-Founders shall attract interest at [12%
per annum].
7.3 [The Co-Founders may mutually agree to draw reasonable salaries to meet their personal
costs and expenses if the financial position of the Business permits.]
8. MINIMUM COMMITMENT OF PARTNERS
The Co-Founders agree to be committed to the Business until the realization/ completion
of the Initial Objective or Initial Timeline subject to Clause 6 above.
9. PERFORMANCE GOALS AND CONSEQUENCES OF NON- PERFORMANCE
9.1 Performance goals between the Co-Founders shall be clearly communicated amongst
them on a periodic basis. Any differences or opinions pertaining to underperformance
will be escalated and discussed on a prompt basis between the Co-Founders. Defaulting
Co-Founders shall be given sufficient opportunity to make up for any shortfall in
performance.
9.2 Continuous non-performance, non-availability or inability to perform duties without
satisfactory justification, despite necessary intimations, shall render the Co-Founders
liable to expulsion. Further, dishonest or unethical conduct damaging to the business or
reputation of other Co-Founders, a serious breach of discipline in course of performance
of duties at the workplace or otherwise, including sexual harassment, as well as a
commission of a crime involving moral turpitude can lead to the expulsion of any Co-
Founder if other Co-Founders unanimously so desire.

10. VOLUNTARY RETIREMENT


10.1 If any Co-Founder voluntarily wishes to leave the Business before realization/ completion
of the Initial Objective or Initial Timeline or is unwilling or unable to stay committed to
the Business on a full-time basis or is expelled before the realization/completion of the
Initial Objective or Initial Timeline, they will be divested of their economic interest in the
business and their stake will be distributed equally to the remaining Co-Founders.
However, the outgoing Co-Founder will be entitled to profits (represented under the
financial statements) that correspond to their economic stake for each month/year which
they have worked as Co-Founders, which will be calculated based on the actual finances
of the Business at the time of leaving.

10.2 Expulsion or voluntary retirement before the Initial Objective or Initial Timeline is
completed pursuant to Clause 9 or this Clause 10 will deprive the outgoing Co- Founder
of his ‘co-founder’ status in the business.
11. CONSEQUENCES OF DEATH
In the event of the death of a Co-Founder, the economic stake shall be subject to a fair
valuation conducted by the Chartered Accountant, using the book value for reference, and
may be purchased in the following manner:
● The surviving Co-Founders proportionately, or
● A ratio that is mutually decided depending on the financial ability of the
surviving Co-Founders, or
● If the Co-Founders are unable or unwilling to buy, the economic interest shall
devolve to the successors of the deceased Co-Founder, without conferring any
managerial or operational rights in the conduct of the Business.
12. DISPUTE RESOLUTION AND JURISDICTION
12.1 All disputes between the Partners inter-se or between any of the Co-Founders with
respect to the Business, and which cannot be resolved amicably must be referred to
arbitration as per the provisions of the Arbitration and Conciliation Act, 1996, in [●], or
such other cities as the disputing parties may unanimously agree upon.
12.2 The arbitration shall be conducted in English by a sole arbitrator appointed jointly by the
parties, as far as possible. If the parties are unable to agree upon an arbitrator, an
arbitration panel consisting of 3 arbitrators will resolve the dispute, where each of the
parties appoints one arbitrator. The arbitrators must be independent and must have had
prior experience of running a startup for at least 5 years or of having invested at least
[INR 100,000] in a startup.
12.3 Arbitrator’s fees will be capped at [INR 15,000], where there is a single arbitrator, or a
total of [INR 30,000] when there is a panel. The arbitrator or the panel must issue a final
decision within 1 month from the date a claim invoking the arbitration clause is filed.
12.4 The courts of [●] shall have exclusive jurisdiction over all matters pertaining to this
agreement.

13. INTELLECTUAL PROPERTY, NON-DISCLOSURE OBLIGATIONS


13.1 Intellectual property in all work that is done by any of the Co-Founders for the
Business shall be exclusively used for the purposes of the Businesses. In case of
retirement or expulsion pursuant to Clause 9 or Clause 10 the outgoing Co-Founder.
13.2 An outgoing Co-Founder shall be under an obligation not to disclose information
specific to the business to third parties, without the express written permission of the
remaining Co-Founders.

13.3 During the period of their association with the Business, disclosure to third parties shall
only be made on a need-to-know basis and by subjecting the third party to a similar
obligation of non-disclosure, or on any other basis as agreed by the Co-Founders.
IN WITNESS WHEREOF the parties have put their respective hands the day and year first
hereinabove written

Signed and delivered by


[Name of the first party]
[Address]
[Email Address]
[Signature]

[Name of the second party]


[Address]
[Email Address]
[Signature]

[Name of the third party]


[Address]
[Email Address]
[Signature]

Witnesses for the Co-Founders:


Name of witness: [●]
Address: [●]
Signature: [●]

Name of witness: [●]


Address: [●]
Signature: [●]

Name of witness: [●]


Address: [●]
Signature: [●]

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