For founders
The founders’ agreement — the clauses that survive a fall-out.
A practical reference for Indian private-limited founders. The clauses below are calibrated for two-to-four founder teams under the Companies Act 2013 and the Indian Contract Act 1872. Copyable language is provided as a starting point; adaptation to the specific deal is essential.
The founders’ agreement is the document that decides what happens when the founders no longer agree. Most teams sign a thin internet template at incorporation, then negotiate an industrial-strength shareholders’ agreement at the Series A round, and discover only at the next dispute that the gap between the two has been filled by silence. The clauses below are the ones that pay for themselves the first time the founding team is tested.
1. The basics — capacity and recitals
State each founder’s name, address, and capacity to contract under the Indian Contract Act 1872, ss 11–12. State the date and place of execution. Recite the company that is being or has been incorporated, the business it is in, and the founders’ intention to contribute time, IP, and capital.
2. Roles, time commitment, and exclusivity
Specify each founder’s role and time commitment. Specify whether the role is full-time and exclusive, and whether external commitments (advisory roles, prior obligations) are permitted. The exclusivity clause is the principal anti-cheating device in the founding stage.
Sample — Time and exclusivityEach Founder shall devote their full working time, attention, and skill exclusively to the business of the Company. No Founder shall, during the term of this Agreement and during the period of their continuing service to the Company, engage in any other business or accept any other employment, board position, advisory role, or consultancy arrangement, except (i) as disclosed in writing in Schedule [X] at the time of execution of this Agreement, or (ii) with the prior written consent of the other Founders.
3. IP assignment from founders
Every contribution made by a founder to the company — code, design, brand, trade secret, customer relationship, business plan — should be assigned to the company in the founders’ agreement. This is the most-overlooked clause in Indian founder-stage practice and the one that surfaces most painfully at the next funding diligence.
Sample — IP assignmentEach Founder hereby irrevocably assigns to the Company, with effect from the date such intellectual property was created or, if earlier, the date of incorporation of the Company, all right, title, and interest in and to any and all intellectual property (including without limitation copyrights, trademarks, trade secrets, patents, designs, software code, content, methodologies, customer lists, brand names, domain names, and know-how) created, conceived, or contributed by such Founder in connection with the business of the Company. Each Founder shall execute such further documents as the Company may reasonably require to perfect such assignment, including assignment deeds in form acceptable for recordal with the Trade Marks Registry, the Copyright Office, and any other applicable authority.
4. Vesting
Vesting is the discipline that prevents a founder who leaves in month four from walking away with one-quarter of the cap table. The market standard for Indian start-ups is a four-year vesting period with a one-year cliff. Where a founder leaves before the cliff, no shares vest. After the cliff, shares vest monthly.
Sample — VestingThe Founder Shares shall vest over a period of forty-eight (48) months from the Vesting Commencement Date, with a one (1) year cliff. Subject to the Cliff, twenty-five percent (25%) of the Founder Shares shall vest on the first anniversary of the Vesting Commencement Date, and the remaining seventy-five percent (75%) shall vest in equal monthly instalments over the subsequent thirty-six (36) months, such that all Founder Shares are fully vested on the fourth (4th) anniversary of the Vesting Commencement Date. If a Founder ceases to provide services to the Company before the Cliff for any reason other than death or permanent disability, no Founder Shares of such Founder shall vest. If a Founder ceases to provide services to the Company after the Cliff but before the full vesting period, only the Founder Shares that have vested as of the date of cessation shall be retained by such Founder, and the unvested portion shall be subject to repurchase by the Company at par value or such other amount as set out in Schedule [Y].
5. Bad leaver, good leaver
What happens to vested shares when a founder leaves depends on why they left. The good-leaver / bad-leaver framework distinguishes voluntary or wrongful departure (loss of vested shares at par or fair-value) from involuntary or non-fault departure (retention of vested shares).
Sample — Bad leaver definition“Bad Leaver” means a Founder who ceases to provide services to the Company by reason of (a) voluntary resignation prior to the fourth anniversary of the Vesting Commencement Date; (b) termination by the Company for material breach of this Agreement, breach of fiduciary duty, fraud, gross misconduct, conviction for a criminal offence involving moral turpitude, or breach of confidentiality or non-compete obligations; (c) breach by the Founder of the IP Assignment provisions of this Agreement.
6. Decision-making and deadlock
For two-founder teams, deadlock is foreseeable. For three-or-four-founder teams, supermajority requirements at the Board can produce deadlock. The deadlock clause should specify what happens when the Board cannot decide.
Sample — Deadlock resolutionIf a matter set out in Schedule [Z] (Reserved Matters) cannot be resolved at two consecutive meetings of the Board of Directors despite good-faith efforts, any Founder may serve a Deadlock Notice. Within fifteen (15) Business Days of the Deadlock Notice, the Founders shall meet and attempt in good faith to resolve the matter. If the matter remains unresolved after such meeting, the matter shall be referred to a mutually appointed independent advisor for non-binding recommendation. If the matter remains unresolved thirty (30) days after the recommendation, the matter shall be referred to mediation under the Mediation Act 2023, and thereafter to arbitration under [the Arbitration Clause below].
7. Restrictive covenants — non-compete and non-solicit
Indian courts treat post-employment non-compete clauses with caution. A non-compete that operates during employment and during a defined post-departure period of reasonable length and territorial scope, with a clear connection to the protectable interest, is generally enforceable. A non-compete that is unbounded in time or territory will be set aside. The Indian Contract Act 1872, s 27, prohibits agreements in restraint of trade except in narrow categories.
Sample — Non-solicit (during and after)Each Founder agrees that, during the period such Founder is providing services to the Company and for a period of twelve (12) months following cessation of such services for any reason, such Founder shall not, directly or indirectly, (i) solicit any employee of the Company to leave the employment of the Company, or (ii) solicit any customer or supplier of the Company to terminate or modify its relationship with the Company in a manner that is materially adverse to the Company. The restriction in this clause is limited to soliciting in connection with a business that competes with the Company in [defined territory and field of business] as at the date of cessation.
Verification flag: Indian non-compete and non-solicit clauses are heavily fact-sensitive. The enforceability of any specific clause depends on the territorial scope, duration, the protectable interest, and the consideration. A clause that restricts the post-termination right to work without geographical or sectoral limit is likely unenforceable. Specific drafting requires review against the Indian Contract Act 1872, s 27, and the post-Niranjan Shankar Golikari line of authority (verification of specific case citations recommended).
8. Confidentiality
The confidentiality clause survives termination of the agreement. It should cover information disclosed by the company and information disclosed by other founders.
Sample — Confidentiality (perpetual for trade secrets)Each Founder shall keep confidential, and shall not disclose to any third party or use for any purpose other than the business of the Company, all confidential information of the Company. The obligation of confidentiality shall continue (i) for trade secrets, indefinitely; (ii) for other confidential information, for a period of five (5) years following the date such information was disclosed to such Founder, save that the obligation shall not apply to information that (a) was in the public domain at the time of disclosure or has subsequently entered the public domain other than through breach of this Agreement; (b) was lawfully in the receiving party’s possession before disclosure; (c) is required to be disclosed by law or by order of a court of competent jurisdiction.
9. Dispute resolution
The internal dispute resolution clause should specify mediation, then arbitration. See the firm’s ADR vs Court guide for sample language.
10. Governing law and jurisdiction
For founders incorporated in India, governing law should be Indian law and jurisdiction should be a clearly-named court (typically the courts in the city of the registered office). Where the company has been incorporated abroad (Singapore, Delaware), the governing law follows incorporation, and the clause should align.
What is intentionally not in this article
This article does not provide: a complete schedule of reserved matters; investor-protection provisions (which belong in the SHA at Series A onward); ESOP architecture (which belongs in a separate ESOP plan); a full set of representations and warranties; or jurisdiction-specific clauses for non-Indian incorporations. Each of these is a separate working brief.
