The Co-Founder Contract is a fundamental legal document used when two or more individuals come together to establish a business venture in Pakistan. This agreement is essential at the early stages of company formation, ideally being executed before or during the company's incorporation process. It provides a comprehensive framework that governs the relationship between co-founders, addressing crucial aspects such as equity distribution, roles, responsibilities, and decision-making processes. The document must comply with Pakistani legislation, including the Companies Act 2017 and relevant corporate laws, while establishing clear mechanisms for business operations, dispute resolution, and potential exit scenarios. It serves as a critical risk-management tool by clearly documenting all parties' expectations, rights, and obligations, thereby preventing future misunderstandings and conflicts.
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1. Parties: Identifies and provides full details of all co-founders entering into the agreement
2. Background: Outlines the context of the agreement, including the business concept and intention to form/run the company
3. Definitions: Defines key terms used throughout the agreement
4. Company Formation: Details about the company structure, registration, and initial setup
5. Roles and Responsibilities: Defines each co-founder's specific roles, duties, and areas of responsibility
6. Equity Distribution: Specifies the initial shareholding structure and any vesting arrangements
7. Capital Contributions: Details of initial and future capital contributions from each co-founder
8. Decision Making: Processes for making business decisions and voting rights
9. Intellectual Property: Ownership and rights regarding company IP and pre-existing IP
10. Confidentiality: Obligations regarding confidential information and trade secrets
11. Non-Competition: Restrictions on competing activities during and after involvement
12. Exit Provisions: Procedures for co-founder exit, including voluntary and involuntary departures
13. Dispute Resolution: Procedures for resolving disagreements between co-founders
14. Governing Law: Specification of Pakistani law as governing law and jurisdiction
15. General Provisions: Standard boilerplate clauses including notices, amendments, and severability
1. Deadlock Resolution: Specific procedures for resolving situations where co-founders cannot reach agreement on crucial decisions
2. Family Succession Rights: Rules regarding transfer of shares to family members in case of death or incapacity
3. External Investment: Procedures and rights regarding seeking and accepting external investment
4. International Operations: Provisions for international business operations if the company plans to operate globally
5. Technology Transfer: Specific provisions for technology transfer if the business is tech-focused
6. Founder Employment Terms: Employment-related terms if co-founders will be employees of the company
7. Resource Commitment: Specific commitments of time, resources, or assets beyond initial capital
8. Islamic Finance Compliance: Additional provisions to ensure compliance with Islamic finance principles if required
1. Schedule 1: Business Plan: Detailed business plan including market analysis, financial projections, and growth strategy
2. Schedule 2: Initial Shareholding Structure: Detailed breakdown of share allocation and classes of shares
3. Schedule 3: Vesting Schedule: Detailed timeline and conditions for share vesting
4. Schedule 4: Intellectual Property Register: List of all IP assets brought into or developed for the business
5. Schedule 5: Initial Capital Contributions: Detailed list of all initial contributions (cash, assets, IP) by each co-founder
6. Schedule 6: Key Performance Indicators: Specific metrics for measuring co-founder performance and contribution
7. Appendix A: Company Formation Documents: Copies of company registration and other regulatory documents
8. Appendix B: Founder Resumes: Professional backgrounds and qualifications of all co-founders
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