The Founders Contract is a crucial document required when two or more individuals or entities come together to establish a business venture in India. It serves as the foundational agreement that governs the relationship between founders, protecting their interests while ensuring clear accountability and structure in the business. This document is particularly important in the Indian business context, where it must comply with the Companies Act 2013, Indian Contract Act 1872, and other relevant legislation. The contract typically addresses key aspects such as equity distribution, voting rights, decision-making processes, intellectual property rights, and exit mechanisms. It's essential to have this agreement in place before commencing business operations or seeking external investment, as it provides clarity and helps prevent future disputes between founders.
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Key Requirements PROMPT example:
Founders Contract
"I need a Founders Contract for a technology startup with three co-founders launching in March 2025, with specific focus on IP protection for our AI software and provisions for future venture capital investment."
1. Parties: Details of all founding members entering into the agreement
2. Background: Context of the agreement, including brief description of the business venture and purpose of the agreement
3. Definitions: Key terms used throughout the agreement and their meanings
4. Business of the Company: Detailed description of the business venture, its objectives, and scope
5. Roles and Responsibilities: Specific roles, duties, and responsibilities of each founder
6. Capital Contribution: Details of initial and future capital contributions by each founder
7. Shareholding Structure: Distribution of shares among founders and vesting schedules if applicable
8. Management and Decision Making: Governance structure, voting rights, and decision-making processes
9. Intellectual Property Rights: Ownership and protection of IP created before and during the venture
10. Confidentiality: Obligations regarding confidential information and trade secrets
11. Non-Compete and Non-Solicitation: Restrictions on competitive activities and employee solicitation
12. Exit Provisions: Procedures for founder exit, including share transfer and buyout terms
13. Dispute Resolution: Process for resolving disputes between founders
14. Term and Termination: Duration of the agreement and conditions for termination
15. General Provisions: Standard boilerplate clauses including notices, amendments, governing law
1. External Investment: Include when the company plans to seek external funding, covering terms for dilution and investor rights
2. Founder Remuneration: Include when founders will draw salary or other compensation from the company
3. Dead Lock Resolution: Include for companies with equal shareholding to address potential voting deadlocks
4. Family Succession Rights: Include when founders want to specify rights of family members in case of death or incapacity
5. International Operations: Include when business operations are planned across multiple countries
6. Technology Transfer: Include when specific technology or technical knowledge is being contributed by founders
7. Pre-existing IP License: Include when founders are licensing their pre-existing IP to the company
1. Schedule 1 - Business Plan: Detailed business plan including market analysis, financial projections, and growth strategy
2. Schedule 2 - Initial Shareholding: Detailed breakdown of share allocation, share classes, and any special rights
3. Schedule 3 - Founder Details: Complete information about founders including contact details, qualifications, and experience
4. Schedule 4 - IP Schedule: List of all intellectual property being contributed by each founder
5. Schedule 5 - Vesting Schedule: Detailed vesting terms and conditions for founder shares
6. Schedule 6 - Reserved Matters: List of decisions requiring special majority or unanimous consent
7. Appendix A - Share Valuation Methodology: Agreed method for valuing shares for future transfers or exits
8. Appendix B - Confidential Information: Detailed list of what constitutes confidential information
Authors
Relevant legal definitions
Affiliate
Board
Business
Business Day
Business Plan
Capital Contribution
Company
Confidential Information
Deed of Adherence
Directors
Effective Date
Encumbrance
Event of Default
Fair Market Value
Financial Year
Founder(s)
Founding Team
Good Leaver
Bad Leaver
Intellectual Property Rights
Investment
Key Man Insurance
Material Breach
Memorandum and Articles of Association
Nominee
Ordinary Course of Business
Parties
Pre-emptive Rights
Prohibited Transfer
Related Party
Reserved Matters
Right of First Refusal
Shares
Share Capital
Shareholder
Special Resolution
Subsidiary
Tag-Along Rights
Drag-Along Rights
Transfer
Valuation
Vesting Period
Vesting Schedule
Voting Rights
Board
Business
Business Day
Business Plan
Capital Contribution
Company
Confidential Information
Deed of Adherence
Directors
Effective Date
Encumbrance
Event of Default
Fair Market Value
Financial Year
Founder(s)
Founding Team
Good Leaver
Bad Leaver
Intellectual Property Rights
Investment
Key Man Insurance
Material Breach
Memorandum and Articles of Association
Nominee
Ordinary Course of Business
Parties
Pre-emptive Rights
Prohibited Transfer
Related Party
Reserved Matters
Right of First Refusal
Shares
Share Capital
Shareholder
Special Resolution
Subsidiary
Tag-Along Rights
Drag-Along Rights
Transfer
Valuation
Vesting Period
Vesting Schedule
Voting Rights
Clauses
Interpretations and Definitions
Incorporation of Company
Business of the Company
Capital Structure
Share Subscription
Shareholding Pattern
Capital Contribution
Roles and Responsibilities
Board Composition
Management Rights
Voting Rights
Reserved Matters
Decision Making
Remuneration
Intellectual Property Rights
Technology Transfer
Confidentiality
Non-Compete
Non-Solicitation
Further Funding
Share Transfer Restrictions
Right of First Refusal
Tag-Along Rights
Drag-Along Rights
Anti-Dilution
Exit Rights
Deadlock Resolution
Events of Default
Termination
Good Leaver/Bad Leaver Provisions
Dispute Resolution
Governing Law
Force Majeure
Notices
Assignment
Severability
Entire Agreement
Amendments
Indemnification
Representations and Warranties
Incorporation of Company
Business of the Company
Capital Structure
Share Subscription
Shareholding Pattern
Capital Contribution
Roles and Responsibilities
Board Composition
Management Rights
Voting Rights
Reserved Matters
Decision Making
Remuneration
Intellectual Property Rights
Technology Transfer
Confidentiality
Non-Compete
Non-Solicitation
Further Funding
Share Transfer Restrictions
Right of First Refusal
Tag-Along Rights
Drag-Along Rights
Anti-Dilution
Exit Rights
Deadlock Resolution
Events of Default
Termination
Good Leaver/Bad Leaver Provisions
Dispute Resolution
Governing Law
Force Majeure
Notices
Assignment
Severability
Entire Agreement
Amendments
Indemnification
Representations and Warranties
Relevant Industries
Technology and Software
E-commerce
Financial Services
Healthcare and Biotech
Manufacturing
Professional Services
Media and Entertainment
Real Estate
Education Technology
Retail
Consulting
Green Technology
Artificial Intelligence
Blockchain
Consumer Products
Relevant Teams
Legal
Corporate Secretarial
Executive Leadership
Finance
Compliance
Corporate Development
Strategy
Business Development
Investment
Risk Management
Relevant Roles
Founder
Co-founder
Chief Executive Officer
Managing Director
Company Secretary
Legal Counsel
Corporate Lawyer
Business Development Manager
Chief Technology Officer
Chief Financial Officer
Startup Consultant
Investment Manager
Venture Capitalist
Business Angel
Corporate Advisor
Compliance Officer
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