The Pre-Incorporation Founders Agreement is a fundamental document used in the Indian business ecosystem when two or more individuals plan to establish a company together. This agreement is particularly crucial in the pre-incorporation phase when founders need to formalize their relationship, responsibilities, and commitments before the actual incorporation process begins. It addresses key aspects such as ownership structure, capital contributions, intellectual property rights, confidentiality obligations, and decision-making processes. Under Indian law, while the document itself isn't statutorily mandated, it derives its enforceability from the Indian Contract Act 1872 and serves as a crucial reference point for future corporate governance once the company is incorporated under the Companies Act 2013. The agreement helps prevent future disputes by clearly documenting all founders' understanding and expectations.
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1. Parties: Details of all founding members entering into the agreement
2. Background: Context of the proposed business venture and purpose of the agreement
3. Definitions: Definitions of key terms used throughout the agreement
4. Business Concept: Detailed description of the proposed business, its objectives, and scope
5. Roles and Responsibilities: Specific roles, duties, and commitments of each founder
6. Capital Contribution: Initial investment commitments from each founder, whether monetary or in-kind
7. Equity Structure: Proposed shareholding pattern and share class details post-incorporation
8. Intellectual Property Rights: Ownership and assignment of IP created before and during the pre-incorporation phase
9. Confidentiality: Obligations regarding confidential information and trade secrets
10. Decision Making: Process for making key business decisions during pre-incorporation phase
11. Incorporation Timeline: Expected timeline and milestones for company incorporation
12. Non-Compete and Non-Solicitation: Restrictions on competitive activities and solicitation of employees/customers
13. Exit Provisions: Process for founder exit or removal before incorporation
14. Dispute Resolution: Mechanism for resolving disputes between founders
15. Governing Law: Applicable law and jurisdiction
1. Vesting Schedule: Terms for gradual vesting of founder shares, used when founders want to ensure long-term commitment
2. Additional Funding: Provisions for securing and managing additional pre-incorporation funding, relevant when external funding is anticipated
3. Family Succession: Provisions for transfer of rights in case of founder's death or incapacity, important for family businesses
4. Advisory Board: Structure and role of advisory board, if planned before incorporation
5. Employee Stock Option Pool: Reservation of equity for future employee stock options, relevant for startups planning to hire key employees
6. Technology Development: Specific provisions for technology development and ownership, crucial for tech startups
7. International Operations: Provisions for international business activities, needed if planning global operations
1. Schedule 1 - Founder Details: Detailed information about each founder including contact details, qualifications, and expertise
2. Schedule 2 - Business Plan: Comprehensive business plan including market analysis, financial projections, and growth strategy
3. Schedule 3 - Capital Contributions: Detailed breakdown of each founder's capital contributions, including valuation of non-cash contributions
4. Schedule 4 - IP Schedule: List and description of all intellectual property being brought into the business
5. Schedule 5 - Responsibility Matrix: Detailed matrix of founders' roles, responsibilities, and time commitments
6. Schedule 6 - Incorporation Milestones: Detailed timeline and responsibilities for incorporation process
7. Appendix A - Confidential Information: Detailed list of information classified as confidential
8. Appendix B - Pre-Incorporation Expenses: List of approved pre-incorporation expenses and their allocation
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