Founders Service Agreement Template for Hong Kong

A Founders Service Agreement is a comprehensive legal document that formalizes the working relationship between your Hong Kong company and its founding members. Unlike standard employment contracts, this agreement addresses the unique position of founders who simultaneously serve as key employees and significant shareholders, ensuring compliance with both the Employment Ordinance and Companies Ordinance.

When do you need this document?

You need a Founders Service Agreement when incorporating a startup or technology company in Hong Kong where founders will take active management roles. This document is essential when multiple founders are involved and you need to establish clear responsibilities, compensation structures, and equity arrangements. It's particularly important for companies seeking investment, as investors often require formal founder agreements before funding. The agreement is also crucial when founders are leaving other employment to join the venture full-time, as it provides employment law protections under the Employment Ordinance while addressing corporate governance requirements under the Companies Ordinance.

Key legal considerations

Your Founders Service Agreement must carefully balance employment law obligations with corporate governance requirements. Key clauses should address equity vesting schedules with acceleration provisions, comprehensive intellectual property assignment covering pre-existing and future innovations, and detailed non-compete and confidentiality provisions. The agreement should specify decision-making authority, particularly regarding matters requiring board approval versus founder autonomy. Termination clauses are critical, addressing both voluntary resignation and involuntary termination scenarios, including the treatment of vested and unvested equity. You should also include dispute resolution mechanisms, succession planning provisions, and clear procedures for modifying the agreement as the company evolves.

Legal requirements in Hong Kong

Under Hong Kong law, your Founders Service Agreement must comply with the Employment Ordinance regarding minimum employment benefits, working hours, and termination procedures, even for founder-employees. The Companies Ordinance governs director duties and responsibilities, requiring disclosure of conflicts of interest and adherence to fiduciary obligations. The Contract Ordinance ensures your agreement's legal validity and enforceability through proper formation and consideration. Personal Data Privacy Ordinance compliance is essential when handling founder personal information and implementing confidentiality measures. The Inland Revenue Ordinance affects how founder compensation and benefits are structured for tax efficiency. Your agreement should also address Securities and Futures Ordinance requirements if equity compensation involves regulated securities, and include proper execution procedures with witnessed signatures to ensure enforceability under Hong Kong law.