Founders' Agreement (for Three or More Individual Founders)

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What is it?

A Founders' Agreement is an agreement used to govern the relationship between the founders of a company and to define their rights and responsibilities. The main purpose is to ensure that the founders are in agreement and avoid misunderstandings and disputes in the future. It covers key areas such as:

  • issuing new shares and transferring existing shares;
  • day-to-day business management and company administration;
  • roles and responsibilities;
  • how important decisions are made; and
  • what happens when founders leave the company.

Why do you need it?

Whether you're hoping to go public or starting a modest company with a few close friends, a Founders' Agreement is a great first step for your business.

It will help you provide the foundation to your business by outlining expectations, guiding decision-making, and reducing risk.

In one simple document, you'll be able to establish important rules that will set the stage for how you will run your business. Without a clear understanding of how you will work together, things can get messy quickly.

Drafting a Founders' Agreement involves envisioning a venture, sharing passions and ambitions, negotiating, experimenting with business-cases for various issues, and making projections.

Key clauses to watch for:

When drafting a Founders' Agreement, it is important to focus on a number of key clauses, in particular:

  • Project description;
  • Capital contribution of each founder;
  • Percentage of shares to be held by each founder;
  • Vesting of shares;
  • Remuneration of founders;
  • Role of each founder;
  • What happens when one founder wants to exit the company and what happens to his or her shares;
  • Whether the founders are restricted from competing with the business of the company after they exit; and
  • How the company's confidential information and intellectual property will be protected.

Founders' Agreement (for Three or More Individual Founders) Document

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