Founders' Agreement for an Indian Startup
The founders' agreement is the document that decides whether the company survives its first crisis. Vesting, IP assignment and good-leaver provisions are not boilerplate — they are the deal.
Introduction
Almost every disputed Indian startup separation traces back to the absence of a founders' agreement. Equity allocated on a handshake, no vesting, IP created personally — and when one founder departs in year two, the remaining team discovers the departing founder owns a fifth outright.
When to Use This Prompt
- Two or more founders setting up a company.
- Team committing significant time and IP.
- Investor funding anticipated within 12-24 months.
- Meaningful disparity in initial contribution.
Statutory & Case-Law Backdrop
Indian Contract Act, Companies Act, 2013, Income Tax Act (vesting/ESOP), Specific Relief Act. Section 27 limits post-termination non-competes; non-solicit and confidentiality remain enforceable. IP assignment must satisfy Copyright Act Sections 18-19 and the Patents Act writing requirement.
The Prompt
Paste into ChatGPT, Claude or Gemini. Replace every bracketed placeholder with your specific facts before generating.
Draft a founders' agreement for an Indian startup to be incorporated as a private limited company under the Companies Act, 2013. Founders: [NAMES, EQUITY SPLIT] Initial working capital: [DETAILS] Roles and titles: [DETAILS] Include: incorporation undertaking, equity and cap-table, four-year vesting with one-year cliff, acceleration on change of control, reverse vesting, role and time commitment, IP assignment to the company, confidentiality, non-compete during tenure, non-solicit [PERIOD] post-exit, transfer restrictions (ROFR, tag-along, drag-along to be carried into SHA), good leaver / bad leaver, arbitration, governing law (India), and accession of future investors.
Anatomy of the Draft
Why the prompt is built the way it is — section by section.
Equity, vesting and acceleration
Four-year vesting, one-year cliff, reverse-vesting for issued shares, single vs double-trigger acceleration.
IP assignment
All work-product assigned. Pre-existing IP in an annexure, licensed to the company.
Roles, time, compensation
Defined roles, full-time, founder salary, breach consequences.
Departure and transfer
Good/bad leaver, treatment of vested/unvested, ROFR, tag, drag carried to SHA.
Common Mistakes to Avoid
- ×Equity without vesting — expensive at Series A.
- ×Omitting IP assignment — messy chain of title.
- ×Non-compete exceeding Section 27.
- ×Treating it as final — it is the foundation for SHA.
- ×No accession provision for new founders or option pool.
Frequently Asked Questions
Enforceable in India?+
Yes, as a contract. Vesting and IP routinely enforced.
Standard vesting?+
Four years, one-year cliff, monthly thereafter.
Company a party?+
Ideally yes, post-incorporation, to enforce in its own right.
Final Thoughts
A founders' agreement is the structural document that makes the company investable and survivable. Get vesting, IP and departure right at the start.
Disclaimer
This article is for informational and drafting-aid purposes only. It is not legal advice. AI-generated drafts must be reviewed by qualified counsel before filing or being relied upon. Verify every citation and statutory reference against the original source.
Related Prompts in Contracts & Agreements
Service Agreement for an Indian SaaS Company
B2B service agreement with SLA, IP, indemnity and Indian jurisdiction clauses.
Petition for Divorce by Mutual Consent under Section 13B HMA
Joint petition with both motions scaffold and settlement terms.
Last Will and Testament for a Hindu Testator
Comprehensive will covering immovable property, financial assets and executor appointment.