Documentation
Founders' Agreement: Review & Drafting Facilitation
We take your inputs: founder roles, equity split, vesting preferences, and IP considerations. Then we produce a customized, statute-consistent founders' agreement draft with a documentation-facilitation review pass.
A founders' agreement is the one document that actually covers the pre-funding period, before any Shareholders' Agreement exists, and even alongside a mandatory LLP Agreement, which focuses on partnership governance rather than the founder relationship. We draft yours around your real roles, equity split, vesting, and IP.
A founders' agreement is a private contract between founders. It isn't a statutory filing, and it isn't something you file with any government authority. It's valid once it has free consent, lawful consideration, competent parties, and a lawful object, the same basic requirements as any Indian contract.
It's not a replacement for your LLP Agreement (which is the statutory, MCA-filed governance document for an LLP) or a future Shareholders' Agreement (typically signed later, at your first funding round, and covering all shareholders including investors). It's the document that specifically covers the founder relationship (roles, equity, vesting, and IP), often before either of those exists.
Scope
What's included
Covering founder roles and responsibilities, equity split, a vesting schedule with cliff, IP assignment, confidentiality, a narrowly-scoped non-solicit, governing law, and dispute resolution.
Checked against the Indian Contract Act, Copyright Act, and Companies Act provisions that actually govern enforceability of these clauses. This isn't a generic template.
Specifics
The details
How this differs from an LLP Agreement or a Shareholders' Agreement
| Founders' Agreement | Shareholders' Agreement (SHA) | LLP Agreement | |
|---|---|---|---|
| Filed with MCA? | No | No | Yes: Form 3, within 30 days of incorporation |
| Who signs | Founders only | All shareholders, including investors | Designated partners |
| When signed | Early: pre-incorporation or at incorporation | Later: typically at first funding round | At LLP incorporation |
| Binds the company? | Only founders personally, unless mirrored into the Articles | Typically incorporated into the Articles at execution | Yes: it is the statutory governance document |
A founders' agreement binds the founders personally as contracting parties. Clauses meant to bind the company itself (like share-transfer restrictions or buyback triggers) generally need to be mirrored into the company's Articles of Association; writing them only into the founders' agreement isn't enough to bind the company. We build this into how we draft your agreement.
Equity vesting: why India isn't the US here
The market-standard structure cited across Indian sources is a 4-year vesting schedule with a 1-year cliff. Nothing vests in the first 12 months, 25% vests at the cliff, and the remaining 75% vests monthly over the following 36 months.
Generic US-derived templates get one India-specific detail wrong: in the US, unvested shares often aren't issued yet. In an Indian Private Limited Company, shares are typically allotted in full to founders at incorporation. Every founder holds real shares from day one. 'Vesting' in the Indian context is therefore usually implemented as a contractual buyback right rather than a mechanism where shares simply fail to exist until vested. A 'Good Leaver' typically keeps their vested shares (and may get some accelerated vesting); a 'Bad Leaver' forfeits unvested shares at nominal value or a steep discount. We draft the buyback mechanism explicitly rather than importing US 'vesting' language that doesn't map cleanly onto Indian company law.
IP assignment: the mistake that shows up at due diligence
Under Section 17 of the Copyright Act, 1957, the author of a work is its first owner by default. That means IP a founder built before incorporation (code, designs, content) belongs to them personally rather than automatically to the company, purely because the company was later built around it. The narrow exceptions (work made by an employee in the course of employment, or specific commissioned-work categories like photographs) don't cover most pre-incorporation founder work or freelance development.
- Unassigned pre-incorporation IP is one of the most commonly missed formation steps
- It's also one of the most damaging to discover during investor due diligence or an acquisition
- Assignment clauses need present-tense language ('hereby assigns,' not 'will assign' or 'shall assign') to actually transfer the IP now rather than leave a gap
- An assignment must be in writing and signed to be legally valid
Non-compete and non-solicit: what actually survives
Section 27 of the Indian Contract Act, 1872 voids agreements in restraint of trade. Indian courts have consistently held post-exit non-compete clauses void, on the basis of the constitutional right to practise any profession or trade. This is well-established across multiple cases rather than resting on a single ruling. What generally does survive in a founders' agreement: confidentiality obligations, a narrowly-scoped non-solicitation clause, IP assignment, and Bad Leaver equity forfeiture. We don't draft broad post-exit non-competes into your agreement. They're legally weak and can undermine the rest of the document.
For a Private Limited Company, buying back a departing founder's shares generally ties into the Companies Act's share buyback and further-issue provisions, and repurchasing shares at a steep discount to fair value can carry income-tax implications worth flagging to your CA. We structure the mechanism to be clear enough for your advisors to assess properly. We draft the agreement; your CA handles the tax advice.
Process
How it works
Step 1 of 4
Gather your inputs
We collect each founder's role, the equity split, vesting preferences, and IP considerations.
Common mistakes founders make
- Relying on an LLP Agreement or a future SHA to cover founder-specific vesting, IP, and exit terms it wasn't built for.
- Writing 'shares vest' without specifying the buyback mechanism. That's US shorthand that doesn't map cleanly onto Indian company law.
- Using future-tense IP assignment language ('will assign') instead of present-tense ('hereby assigns'), leaving a gap where nothing is actually transferred yet.
- Assuming a written founders' agreement alone locks in share-transfer restrictions against the company. Clauses meant to bind the company generally need to be mirrored into the Articles of Association.
- Including a broad post-exit non-compete clause, which is generally unenforceable under Indian law and can weaken the rest of the agreement.
- Leaving pre-incorporation IP unassigned until it becomes a due-diligence problem at a funding round or acquisition.
Clarifications
Frequently asked questions
Likely yes. Your LLP Agreement covers partnership governance (profit sharing, admission/exit, management) rather than founder-relationship mechanics like vesting, IP assignment, or a founder non-solicit. Many LLP founders treat founder-relationship clauses as a rider to the LLP Agreement or a standalone founder-side contract.
An SHA typically arrives later, at your first funding round, and covers all shareholders including investors. A founders' agreement covers the founder-only relationship, usually signed early, before any SHA exists. If you only have an SHA, there's no founder-only document covering the pre-funding period.
Not mechanically. In India, founders typically hold real, fully allotted shares from incorporation. 'Vesting' is implemented as a contractual buyback right the company or remaining founders can exercise on a departing founder's unvested shares, rather than a mechanism where shares simply don't exist yet.
By default, it belongs to that founder personally under the Copyright Act rather than to the company, even once the company is built around it. It needs an explicit, present-tense, signed assignment to actually transfer, which is something we build into your agreement.
A broad post-exit non-compete is generally unenforceable under Indian contract law. What we do draft: confidentiality, a narrowly-scoped non-solicitation clause, IP assignment, and Bad Leaver equity forfeiture. These are the mechanisms that actually hold up.
We capture your deadlock/exit preference as an input. Structuring a full deadlock-resolution mechanism is a longer, one-on-one conversation, so talk to us directly if a 50-50 split or a specific deadlock scenario is a real concern for your founding team.
Related
Learn more
Free templates & checklists
Ready-to-use starting points — no email required.
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Guides that walk through every step.
Guide
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