Founder’s Agreement Drafting by Expert
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Founder's Agreement
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Customization and Changes: If you need any changes done to the agreement, our lawyers will take care of it and send it across to you for your review again.
Procedure for Drafting a Founders Agreement:
Prepare the Draft Agreement: The first step is to prepare a draft of the founder’s agreement, which includes all the necessary fields such as the objectives of the company and the terms and conditions to be followed by the co-founders.
Check for Mandatory Provisions: Once the drafting process is complete, check that all mandatory provisions have been included and that there are no ambiguous clauses.
Add Additional Information: If required, additional information that needs to be included in the agreement should be added at this stage.
Acknowledge Final Draft: The final draft of the agreement should be acknowledged by all the co-founders, indicating that they have scrutinized and accepted the terms and conditions mentioned in the agreement.
Notarize the Agreement: Once all co-founders have agreed to the agreement, it should be notarized on non-judicial stamp paper.
Sign the Agreement: After notarizing, all co-founders should sign the agreement.
Seek Expert Guidance: Before entering into the agreement, it’s advisable to seek expert guidance to avoid any potential disputes.
Documents Required for Preparation of a Founders Agreement
- Address proof of all co-founders
- Identity proof of all co-founders
- Identity proof of witnesses
- A clear objective of the company
- The number of equity shares of each co-founder
- The overall percentage of shares of each co-founder.
Benefits of a Founders Agreement
- Determining the Type of Business Entity: A founders agreement can clearly state the nature and type of entity that the co-founders should establish, thus providing a clear path to follow.
- Outlined Business Plans: The agreement can describe the vision and mission of the entity, and set short-term and long-term goals to be achieved over a period of time.
- Designating Roles and Responsibilities: It’s important to designate the roles and responsibilities of each co-founder according to their area of expertise, such as marketing, operations, finance, etc., to avoid overlapping functions and confusion.
- Structure of Ownership: The founder’s agreement can specify the structure of ownership in relation to the initial contributions made by the co-founders or the percentage of equity shares held by each co-founder in the case of a company, thus preventing any future conflicts.
- Decision Making: The agreement can formulate a procedure to be followed during the decision-making process to handle any ideological conflicts that may arise. If a voting system is adopted, the agreement can define the value of each founder’s vote and provide a solution in the event of a deadlock situation.
- Compensation Provisions: The agreement can lay out a scheme of compensation to be carried out if any co-founder violates the mandated provisions, specifying the proportion of compensation to be paid to each co-founder.
- Expulsion of Co-founders: The agreement can provide a structure for dealing with situations where a co-founder engages in fraudulent activities, such as misappropriation of funds, sexual harassment, or getting employed with other organizations, and can sort out appropriate funds to be returned to the expelled co-founder.
- Confidentiality: The agreement can include a separate clause on confidentiality that obligates the founders not to reveal any confidential information about the business.
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