Co-Founder's Agreement in Mumbai

Co-Founder agreement in Mumbai

A contract agreed upon by the co-founders of a company is a Founder's Agreement. It covers aspects such as the ownership, responsibilities, roles, and the initial investment of each founder.

The nature of the founder’s agreement is that it allocates a specific role to the founders of an enterprise and thus preventing any confusion amongst them within the organization in the future.

This helps the entrepreneurial organization to accomplish their goals and objectives in a better and harmonious way without any conflicts amongst the founders, further strengthening better relationships between them.

Prior to drafting of a founder’s agreement, it is crucial for the founders to discuss openly the facets of the agreement. Generally, the agreement is made during the incorporation of the organization.

Some of the important elements of a founders’ agreement are as follows:

• Business Definition- The agreement must define the potential of the enterprise clearly. The objectives of the venture, vision, and mission are to be defined.
• Ownership- The ownership element of the agreement addresses the percentage or number of shares which is held by each co-founder.
• Capital- The Capital Clause sets out the initial investment contributed as capital by each founder.
• Roles and Responsibilities- This ensures that the roles and responsibilities of each founder like decision-making, powers, duties etc are set out clearly to prevent any vagueness and ambiguity in the future.
• Compensation- It is also important to clarify in the agreement the compensation or salary that the founders are entitled to draw.
• Dissolution- The dissolution clause talks about the possibility of winding-up and liquidation of the enterprise. It sets out the method which will be followed for distribution of proceeds, assets, and liabilities amongst the founders at the time of winding up or liquidation of the enterprise.

What is a Founder’s Agreement?

The contract that regulates business relation of the company’s co-founders who enter into such a contract to govern uncovered matters in the company’s agreement. It sets out the rights, responsibilities, liabilities, and obligations of every founder.

Why Is Founder’s Agreement in Mumbai Needed?

India is a land of festivals. Each state has its one or the other special festivals which is uniquely celebrated only in that particular state. Mumbai has the world famous Ganesh Utsav. It is a ten day long festival celebrated with utmost joy and excitement. During this fest, statues of Ganeshji are displayed in every corner of the city, including the houses of the local people. The most famous of these statues is the one that is displayed in Lalbaug where the deity is known as the ‘Lalbaug ka Raja’. The Visarjan ceremony that takes place on the 10th day, witnesses thousands of people on streets, singing and dancing, to bid a farewell to Ganeshji.

You can draft founder’s agreement in Mumbai with the help of CompanyVakil.

It is essential to enter into such agreements to solve issues in case any difficulty arises. In absence of an agreement to this effect, one partner may walk away and use knowledge of the business and know-how, for competition.

One may also get into a situation where one partner takes a back step and just reap the benefits of the hard labor of the other partner.

None of these positions are favorable for the business and are undesirable. Thus, if one does not engage in future planning, he/she might end up jeopardizing the business even before it starts.

Essentials for a Founder’s Agreement in Mumbai 

• The responsibilities and roles of each co-founder are to be established to have a well-functioned management system.
• Assignment of ownership of new enterprise amongst founding team. Splitting up of equity ownership between the founders at a predetermined ratio is imperative to ensure that there are no hurt feelings or misunderstandings after the business comes into existence.
• Implementation of terms for market vesting for all founders’ equity so that future planning can be done.
• When co-founders start reiterating an idea and come up with a business plan or start developing and building a platform or a product, intellectual property (IP) is created. It is necessary to ensure that whatever developments are done in IP do not belong to an individual but the entity.