Founders' Agreement Template (India) — Free Format
A founders' agreement sets out how co-founders of an Indian startup share equity, vest their shares, divide roles, make decisions and handle a founder leaving. Signing one early prevents the most common reason startups break down: unresolved founder disputes.
Stamp, registration and e-sign at a glance
The three things to settle before anyone signs this agreement in India.
Payable under the stamp law of the state where it is signed; rates vary by state. Unstamped, it cannot be used as evidence until duty and penalty are paid.
Check your state's rateRegistration is not required, but update the articles of association to reflect transfer restrictions.
This agreement can be signed electronically with Aadhaar eSign or a DSC under the Information Technology Act, 2000. Electronic signatures listed in the Act's Second Schedule carry a presumption of reliability.
What cannot be e-signedWhat is a Founders' Agreement?
A founders' agreement is a contract between founders (and usually the company) that complements the articles of association. Key terms such as vesting and transfer restrictions should also be reflected in the articles to bind the company and future shareholders.
When to use it
- Incorporating a private limited company with two or more founders
- Before raising the first external investment
- When a new co-founder joins after incorporation
Key clauses checklist
Make sure your draft covers each of these. Linked clauses open a sample wording with drafting tips.
- Equity split and vesting
- Roles and time commitment
- IP assignment to the company Sample clause
- Confidentiality Sample clause
- Non-solicitation Sample clause
- Good leaver and bad leaver
- Dispute resolution Sample clause
Indian law notes
Vesting in Indian companies
Indian company law does not have reverse vesting built in. Founders usually hold shares outright and agree that unvested shares may be bought back or transferred at a nominal price if they leave — subject to the Companies Act, 2013, FEMA pricing rules where applicable, and the articles.
Non-compete after exit
Post-exit non-competes are generally void under Section 27 of the Contract Act, though restrictions tied to the sale of shares and goodwill can be treated differently. Focus on confidentiality, IP assignment and non-solicitation.
FOUNDERS' AGREEMENT
This Founders' Agreement is made on [Date] between:
1. [Founder 1 Name], [address] ("Founder 1");
2. [Founder 2 Name], [address] ("Founder 2"); and
3. [Company Name] Private Limited, CIN [CIN], [registered office] (the "Company").
1. EQUITY
1.1 The founders hold equity shares of the Company as follows: Founder 1 [ ]%, Founder 2 [ ]%.
1.2 Each founder's shares vest over [4] years: [25]% after [12] months from [Vesting Start Date] (the cliff), and the rest in equal monthly instalments over the next [36] months.
2. LEAVERS
2.1 If a founder stops working full-time for the Company, the Company or the other founders may buy that founder's unvested shares at [face value], to the extent permitted by law.
2.2 A "bad leaver" (dismissed for fraud, serious misconduct or material breach of this Agreement) may also be required to sell vested shares at [face value / fair value discounted by [ ]%].
2.3 A "good leaver" (death, disability, or leaving after the cliff for any other reason) keeps vested shares.
3. ROLES
Founder 1 is [CEO] responsible for [ ]. Founder 2 is [CTO] responsible for [ ]. Each founder shall work full-time for the Company and not take up other employment without consent.
4. DECISIONS
The following require the written consent of all founders: issuing new shares, raising debt above Rs. [ ], selling the business, changing the business, hiring or firing senior leaders, and related-party transactions.
5. INTELLECTUAL PROPERTY
Each founder assigns to the Company all rights in any IP created for the Company's business, including before incorporation, and shall sign any documents needed to record that.
6. CONFIDENTIALITY AND NON-SOLICITATION
Each founder shall keep the Company's information confidential and, for [12] months after leaving, not solicit the Company's employees or customers.
7. TRANSFER RESTRICTIONS
No founder may transfer shares before [date / funding round] without the consent of the other founders. Transfers are subject to a right of first refusal for the other founders. The Company shall amend its articles to reflect this clause.
8. DEADLOCK AND DISPUTES
If the founders cannot agree on a reserved matter for [30] days, they shall attempt mediation, and failing that, arbitration by a sole arbitrator under the Arbitration and Conciliation Act, 1996, seated at [City].
9. GENERAL
Indian law applies. This Agreement continues until the Company lists, is acquired, or the founders agree to end it.
Founder 1: ____________ Founder 2: ____________ For the Company: ____________ Replace every [placeholder] and delete options that do not apply.
How to execute it
From blank template to a signed, stamped and stored contract.
Agree equity split, vesting schedule and roles before incorporation if possible.
Decide good-leaver and bad-leaver terms.
Mirror transfer restrictions in the articles of association.
Sign electronically and stamp under state law.
Revisit the agreement before the first funding round.
Frequently asked questions
Do founders in India need a founders' agreement?
It is not mandatory, but it is one of the most valuable early documents. Investors usually ask about vesting and founder commitments during due diligence.
How does founder vesting work in India?
Founders usually hold all shares upfront and agree that unvested shares can be bought back at a nominal price if they leave early, subject to company and exchange-control law.
Should IP created before incorporation be assigned?
Yes. Code, designs and brand work created before the company existed belong to the founders until assigned in writing.
Related templates
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