Whether the company is small, medium or large, in the initial stage of the company it has to start from the scratch whatever they have in their possession. As we see that there are early rise startups which are becoming a very common practice in India. While setting up a new business the founders have to make an agreement between them for setting up the business & as an acceptance of a business proposal.
A founder’s agreement is basically an agreement in written form between the co-founders of the company, which is made in the need of stating properly rights, duties, responsibilities & liabilities. It is not a contract binding co-founders. It is an agreement which clearly sets out the strategy for issues like ownership, board of directors, admission or resignation of partners, etc.
A Founder’s Agreement is an agreement made between the co-founders of the company when setting up a business. It is made while incorporating the business. It is made with respect to clearly set out that how things stand while setting up the business. Founders Agreement is also made to avoid the uncertain circumstances which can damage the smooth running of a business. It also helps to understand the risk involved in the business. A founder’s agreement is also known as:
- Co-founders Agreement
- Start-up Co-founders Agreement
NECESSITY AND IMPORTANCE
The Founder’s Agreement is made in respect to avoid ambiguity in future regarding business between co-founders. As we know there is always a possibility of happening an uncertain situation like death of one of the co-founder or resignation, continuation of the business. So to avoid the loss which it can do to business or happening of such situation will affect business. So to avoid this loss for a safety purpose founder’s agreement is made.
It clears all the doubts between co-founders & helps to build a strong relationship among partners.