What Is Founders Agreement?
The written accord of all Founders is essential to approve any extra investment within the Company from any party, as well as Founder, and to issue any equity securities or rights convertible into the Company's equity to any party therein.
Advantages of A Founders Agreement
- Clears the Air
Many matters tend to go undiscussed between co-founders. This agreement provides the first team members the chance to discuss these crucial matters, clearing any doubts and allowing for a better relationship.
- Defines Roles
This provides members the chance to clarify their role within the company and also gives each or all founding member a better understanding of what the other founding members do.
Frequently Asked Questions
The term “Founders Agreement” denotes a written document that is used in the cases, such as Relative Split of the Equity Shares among the members of the company. Also, it deals with the tenure of how long the members will have to remain with the company for their shares to fully vest.
The essentials of a Founders Agreement are Definition of the Business, Details of the Capital Raised, Details of Ownership, Roles and Responsibilities of each co-founder, Compensation, Details regarding the Exit Formality, Dissolution of the Firm, Modes of Dispute Resolution, and Miscellaneous Provisions.
The advantages of a Founders Agreement are, determines the type of business entity, outlines the business plan, designates roles and responsibilities, structures the ownership, facilitates decision making, provisions of compensation, expulsion of co-founders, confidentiality.
The founders’ agreement will prohibit co-founders from involving in other employment openings, even if they are ousted or relieved from the company.
Yes, it is compulsory to get the founder's agreement executed on a non-judicial stamp paper for relevant value and get it notorised from the notary person.
The main reason behind the Notorisation is to make the agreement a legally enforceable one.
The penalty for the breach of provisions will depend on the severity of the dispute.
No, it is not compulsory to get the Founders Agreement registered.
Yes, being a legal document, there is a specific format prescribed for drafting a Founders Agreement.
There are no documents required to draft a Founders Agreement.
The steps involved in the Procedure are Contact an Experienced Lawyer, Draft the Founders Agreement, Send For Review, Get it Notarised.
Normally, a period of 3 to 4 days is required to draft a Founders Agreement.
Yes, it is always advisable to consult professionals for drafting a Founders Agreement.