Founder Co-Founder Agreement Template India
Download a standard Founder Co-Founder Agreement used by top Indian professionals. Before you sign, analyze it for buried liabilities in 60 seconds with our AI.
What is a Founder Co-Founder Agreement?
A Co-Founder Agreement is a foundational document that dictates the relationship among company founders. It covers equity splits, roles, vesting schedules, and what happens if a founder leaves a startup in India.
Key Clauses to Watch Out For
When drafting or signing a Founder Co-Founder Agreement in India, pay close attention to:
- Vesting Schedules (Cliff): Standard practice is a 4-year vesting with a 1-year cliff to protect the cap table.
- Roles and Responsibilities: Explicit expectations to prevent operational conflicts.
- Departure / Removal Provisions: Mechanism for forced buyouts or 'Good Leaver/Bad Leaver' clauses.
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Who Needs This Agreement?
Early-stage startup teams looking to formalize their business relationship before incorporating as a Private Limited Company or LLP in India.
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Analyze Contract FreeWhat Is a Co-Founder Agreement?
A Co-Founder Agreement is a legally binding document used for defining rights, responsibilities, equity ownership, and exit provisions between co-founders of an Indian startup to prevent future disputes that could derail the company. In India, this agreement is governed by the Indian Contract Act, 1872; Companies Act, 2013 and related sector-specific regulations.
Without a well-drafted Co-Founder Agreement, both parties are exposed to significant legal and financial risk. Contract Shield provides a professionally reviewed Co-Founder Agreement template that you can download and use immediately, or upload your existing agreement to our AI analyzer for a comprehensive risk report.
5 Critical Clauses in Every Co-Founder Agreement
Before signing or issuing a Co-Founder Agreement, these are the five clauses that require the closest attention:
Equity Structure
Defines each co-founder's percentage ownership. Should specify whether this is pre-money equity and how dilution will be handled in future funding rounds.
Vesting Schedule
Standard is 4-year vesting with a 1-year cliff. Reverse vesting (founders own shares upfront but they vest over time) is common in Indian startups. Unvested shares revert to the company upon exit.
Roles and Responsibilities
Clearly defines the CEO/CTO/CMO split, operational authority, and domains of exclusive decision-making. Lack of clarity here is the most common cause of co-founder conflict.
Non-Compete and Non-Solicitation
Prevents a departing co-founder from immediately starting a competing business or poaching employees. Must be reasonable in duration (6–12 months) and geographic scope to be enforceable.
Deadlock Resolution
Specifies how to break deadlocks when co-founders cannot agree on a critical decision. Options include a casting vote to the CEO, mediation, or a buy-sell mechanism.
Legal Requirements Under Indian Law
Co-founder agreements for registered companies must align with the Companies Act, 2013 and the company's Articles of Association. Share transfers between co-founders may require board approval and must follow the company's pre-emption rights.
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Frequently Asked Questions
What happens if a co-founder wants to leave the startup?
The co-founder agreement's exit provisions govern this. Unvested shares typically revert to the company. Vested shares may be subject to a right of first refusal (ROFR), allowing remaining founders or the company to buy them before an external sale.
Can co-founders have different equity percentages?
Yes. Equity splits should reflect each founder's relative contribution of ideas, IP, capital, and time commitment. Equal splits are common but unequal splits are healthier when contributions are genuinely unequal.
Does a co-founder agreement expire?
The agreement does not expire, but many provisions (non-compete, non-solicitation) have specified time limits. Review and update the agreement at key milestones — incorporation, funding rounds, or team changes.
Frequently Asked Questions
Who owns the IP created by an independent contractor in India?
By default under the Copyright Act 1957, the freelancer or consultant owns the IP. For the hiring client to own the work, the contract must feature an explicit written IP assignment clause. There is no automatic 'work-for-hire' doctrine.
Is stamp duty mandatory on commercial service agreements in India?
Yes. To be admissible as evidence in a court of law under the Indian Stamp Act 1899, all service agreements must be executed on stamp paper of appropriate value.
What is a substitution right in a consulting agreement?
A substitution right allows a consultant to send a qualified replacement to perform the work. This confirms their independent contractor status and avoids employee misclassification risks under Indian labour laws.