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Co Founder Agreement

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co-founder-agreement

What are the key components typically included in a co-founder agreement template?

A co-founder agreement template typically includes essential components such as the names and roles of co-founders, equity ownership and vesting schedules, responsibilities and duties, decision-making processes, dispute resolution mechanisms, intellectual property ownership, non-compete and confidentiality clauses, investment commitments, and terms for co-founder departure or buyout. These elements establish the legal framework for the co-founder relationship, ensuring clarity, accountability, and protection of each co-founder's interests in a startup or business venture.

Is a co-founder agreement template legally binding?

Yes, a properly executed co-founder agreement template is a legally binding contract. It serves as a formal and legally recognized document that outlines the terms and conditions of the co-founder relationship within a business venture. Courts generally uphold the terms of such agreements, provided they are voluntarily entered into and meet legal requirements. Breaching the terms of a co-founder agreement can lead to legal consequences, including disputes, financial liabilities, or the dissolution of the business.

Can I customize a co-founder agreement template to fit the specific terms of my co-founder relationship?

Absolutely, co-founder agreement templates are often customizable to accommodate the unique requirements and dynamics of the co-founder relationship and business venture. Co-founders can negotiate and modify the template to include specific equity allocations, roles and responsibilities, exit strategies, or other relevant provisions tailored to their particular situation. However, it's essential to ensure that any modifications are mutually agreed upon, documented clearly within the agreement, and comply with legal and regulatory requirements. Consulting with legal professionals or business advisors is advisable when making significant changes or addressing specific legal considerations in the co-founder agreement.

To draft a co-founder agreement, outline each co-founder's roles, responsibilities, ownership stakes, decision-making processes, vesting schedules, dispute resolution methods, and exit strategies. It's advisable to consult with legal professionals.

A vesting agreement for co-founders outlines a schedule for earning ownership (vesting) over a period. It ensures that co-founders don't walk away with their full ownership stake if they leave the company prematurely.

No, a co-founder agreement is specific to the founding team and outlines their roles and responsibilities. A shareholder agreement, on the other hand, involves all shareholders and covers broader corporate governance issues.

Not necessarily. Share allocation among co-founders should be based on their contributions, roles, and responsibilities. It's common for co-founders to have different ownership stakes based on their involvement.

Share division among co-founders can be determined through negotiation and agreement. Factors such as initial investments, time commitment, expertise, and contributions to the business should be considered when allocating shares. It's crucial to have this clearly defined in a co-founder agreement.

CO-FOUNDER AGREEMENT

 

This Co-Founder Agreement (the “Agreement”) is effective [DATE],

 

 

BETWEEN: [COMPANY NAME], (the “Company” or “Corporation”), an individual with their main address located at OR a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at:

 

[COMPLETE ADDRESS]

 

 

AND: [CO-FOUNDER NAME], (the “Co-founder”), an individual with their main address located at:

 

[COMPLETE ADDRESS]

 

 

Collectively, the Company or Corporation and Co-founder shall be referred to as the “Parties.”

 

WHEREAS the Company is engaged in the business of [SPECIFY THE BUSINESS];

WHEREAS the Company wishes to add the Co-founder as an additional founder of the Company (the “Co-founder” or “Additional Founder”).

 

NOW THEREFORE in consideration of the covenants contained herein, and in connection with such collaboration of the business concept and technology, and in consideration for a mutually agreeable framework which shall serve as the foundation for the Founders to successfully develop the Business Concept and Technology, the undersigned hereby agree as follows:

 

 

CAPITAL CONTRIBUTIONS AND EXPENSES

 

 

Capital Contribution.

The

C

o-f

ounder hereby commits to contribute up to

[SPECIFY AMOUNT]

 toward Company expenses when called

on

by the Company, as non-refundable capital contributions.

 

Additional Capital Contribution

. The

C

o-founder

may make additional capital contributions in the form of cash and prepaid expenses from time to time to fund the Company’s ongoing capital and operating needs.

 

 

ROLES AND RESPONSIBILITIES

 

 

Co-

Founder’s Contribution.

The

C

o-founder

shall, using best efforts, contribute to the development of the Product or Service pursuant to

the

Founder’s “Role and Responsibility” description as set

out at

Schedule

2

attached hereto.

 

 

OWNERSHIP

 

 

Intellectual Propert

y

.

The

Co-

Founder shall grant and assign to the

Company

immediately

,

incorporation of

all of

his or her right

s

, title, and interest in the Product or Service (including all right

s

, title and interest

in the

intellectual property and all applications thereto), including waiving all moral rights, and assigning all patents, designs, industrial designs, trade-marks, copyrights, trade secrets, ideas (however formed or unformed) and labor and/or work product

s

that result from any task or work performed by the

Co-

Founder that relates to the Product or Service for the full term of such rights (the “

Transfer

”).

 

Ownership of the Company:

The

Co-Founder

will have an equal ownership interest in the Company. The

Co-Founder

’

s

ownership interests need not be represented by a certificate or any other evidence beyond that contained in this

A

greement. If a Founder requests, the Company will issue a certificate evidencing the Founder’s interest. The certificate must contain a legend noting that the ownership interest is subject to legal and contractual restrictions on transfer.

 

Transfer to

Company

.

 The

Co-Founder

acknowledge

s

and agree

s

that any discovery, invention, secret process or improvement in procedure made or discovered by

the

Co-Founder

in connection with or in any way affecting or relating to the Product or Service or capable of being used or adapted for use in the Product or Service shall immediately be disclosed to the

Company

and shall belong to and be the absolute property of the

Company

.

 

 

EQUITY DISTRIBUTION & VESTING

 

 

Equity Distribution.

Subject to this

Section

4

,

the Shares of the Corporation shall be issued to the

Co-Founder

according to the distribution chart below (the “

Founder

Equity

”):

 

Name

Equity Distribution (%)

[ADDITIONAL FOUNDER NAME]

[EQUITY PERCENTAGE]

 

 

Ordinary Distribution

.

The Company may (but is not required to) make ordinary distributions to the

Co-Founder

out of cash received by the Company (excluding new capital contributions or loans), less all accounts payable and reserves against anticipated expenses from time to time

,

as determined by a majority of Founders. All distributions must be made in the following order:

 

First, in equal proportion to all Founders who have contributed cash that has not been repaid, until each Founder has been paid out to the extent of such contributions in full;

 

Second, to all Founders in equal proportion.

 

Vesting.

The Equity

shall

be issued pursuant to

point 4.1

and

shall vest to

the C

o-founder

over

[SPECIFY NUMBER OF YEARS FOR VESTING]

, and

the C

o-founder

shall enter into a customary stock restriction agreement on the Incorporati

on Date outlining such vesting.

 

Issuance of

S

hares.

The

S

hares issued to

the

C

o-founder

shall come from the same series and class of

S

hares, such that there are no differences in the rights (including but not limited to voting and distribution rights) accorded to the

S

hares issued to

the

C

o-founder

.

 

 

 

RESTRICTIONS

 

 

The

C

o-founder

may not transfer, pledge or otherwise encumber any Shares or any ownership or entitlement to ownership of the Corporation or of the Product or Service described herein without the unanimous written consent of the Founders.

 

 

OPPORTUNITIES AND

DUTIES TO THE COMPANY

 

The

C

o-founder

must refer to the Company, in writing, all opportunities to participate in a business or activity that is directly competitive with the Project within [GEOGRAPHIC REGION], whether as an employee, consultant, officer, director, advisor, investor, or partner. The Company will have

[

NUMBER OF DAYS

]

days to decide whether to pursue any referred opportunity, and to notify the referring

C

o-founder

of its decision in writing. If the Company elects not to pursue the opportunity, or if it does not notify the referring

C

o-founder

of its intent in writing within the

[

NUMBER OF DAYS

]

day

s

period, then the referring Founder will be free to pursue the opportunity independently. If the Company elects to pursue the opportunity, but later abandons it, then the referring Founder will be free to pursue the opportunity independently at such time.

 

 

CONFIDENTIALITY AND NON-COMPETE

 

 

Confidentiality.

The

C

o-founder

agrees

to keep all non-public information with respect to Project intellectual property (IP) confidential and not to disclose it to any other party, except (i) to attorneys and advisors who need to know in connection with performing their duties, (ii) to potential business development partners and/or investors approved by the Company in writing, and who are bound by a confidentiality agreement in writing, and (iii) in response to an inquiry from a legal or regulatory authority.

The

C

o-founder

agree

s

to keep the Product or Service confidential; disclosure of the Product or Service will occur only on an as-needed basis and only upon consent of all Founders. Notwithstanding such unanimous consensual disclosures, the Founders shall take all necessary steps to keep the Product or Service confidential until the formation of the Corporation, at which time the Founders shall further detail and define any confidentiality obligations

.

 

Non-Competition.

Immediately after the incorporation of the Company, the

C

o-founder

shall not at any tim

e during their term as

C

o-founder

and for a period of 12 months after they have ceased (i) to be a

C

o-founder

; (ii) to provide services to the Company, whether as a partner, employee, contractor, officer, director or otherwise; or (iii) to hold Shares, whichever is later, alone or jointly or in any capacity whatsoever, directly or indirectly, of [PROVINCE/STATE] of [COUNTRY], in connection with any of these transactions, either at a time when they became Share

holders

or at any other time

:

 

pursue, participate, assist, be engaged, concerned or interested in any business competing with the Product or Service;

 

interfere or seek to interfere or take such steps as may interfere with the continuance of supplies to the Startup (or the terms relating to such supplies) from any suppliers who have been supplying materials, components, products, goods or services to the Startup;

 

solicit or attract or offer employment or attempt to solicit or attract or offer employment to any person who was a founder, employee, officer or manager of the Corporation at any time without the express prior written consent of the

F

ounders; or

 

use or adopt or purport to use or adopt the name or any trade or business name of the Corporation for any purpose.

 

 

EXTENSION OF AGREEMENT

 

 

Upon the formation of the Corporation, the

C

o-founder

will enter into a Unanimous Shareholder Agreement to formalize all terms of this Agreement, unless otherwise agreed to by all the Shareholders.

 

 

DISPUTE RESOLUTION

 

 

In the event that the

C

o-founder

is

unable to agree on a mutually acceptable separation pursuant to this Section

9

, the

C

o-founder

will

agree to submit to a binding confidential arbitration to be held in

[STATE/PROVINCE]

and conducted by a mutually agreed arbitrator. The

C

o-founder

agree

s

and acknowledge

s

that all provisions of this Agreement, including the confidentiality provisions, will be binding until the end of the arbitration process. The costs of the arbitration shall be borne equally by the

C

o-founder

s

.

 

 

GENERAL PROVISIONS

 

 

Good Faith.

All actions taken pursuant to this Agreement shall be made in good faith without intention to unduly deprive a Founder of any interests, rights or benefits.

 

Representations and Warranties.

The

Co-f

ounder represents and warrants that he or she is not a party to any other agreement that would restrict such Founder’s ability to perform its obligations as set forth in this Agreement.

The

Co-founder

represents and warrants that no third party can claim any rights to any intellectual property or other proprietary right possessed by

the Co-founder

as it relates to the Product or Service.

 

Assignment.

This Agreement shall not be assigned by

the

Co-founder

without the written consent of all other Founders.

 

Successors / Assigns

. This

A

greement shall be binding upon and inure to the benefit of the

Co-founder

, their successors, and their permitted assigns.

 

Notices.

Any notice, consent or approval required or permitted with respect to this Agreement (referred to in this section as a "Notice") shall be in writing and shall be sufficiently given if delivered (in person, by courier or other personal delivery method) or transmitted by facsimile to each Founder at the address indicated beside the name of each Founder

in Schedule 2

attached hereto.

 

Currency.  

Except as otherwise stated herein, all amounts are stated in [COUNTRY] currency.

 

 

 

GOVERNING LAW AND JURISDICTION

 

 

This Agreement shall be governed by and interpreted in accordance with the laws of

[STATE/PROVINCE]

and the laws of

[COUNTRY]

applicable therein.

SEVERABILITY

 

 

If any provision in this

A

greement is held to be invalid or unenforceable in any jurisdiction, the validity and enforceability of all remaining provisions contained herein shall not in any way be affected or impaired thereby, and the invalid or unenforceable provisions shall be interpreted and applied so as to produce as near as may be the economic result intended by the

P

arties hereto.

 

 

AMENDMENT/WAIVER

 

 

This

A

greement may only be amended with the written consent of all Founders, and none of its provisions may be waived except with the written consent of the

P

arty waiving compliance.

 

 

ENTIRE AGREEMENT

 

 

This

A

greement contains the entire

A

greement between the

P

arties hereto with respect to the subject matter hereof

and supersedes all prior arrangements or understandings (whether written or oral) with respect thereto.

 

 

AGREEMENT CONFIDENTIAL

 

 

The Parties shall keep the terms and conditions of this Agreement confidential except as may be required to enforce any provision of this Agreement or as may otherwise be required by any law, regulation or other regulatory requirement. Notwithstanding the generality of the foregoing, the Parties may disclose this Agreement to

their

legal and/or financial advisors.

 

 

COUNTERPARTS

 

This Agreement may be executed by the

Co-founder

in counterparts and may be executed and delivered by fax or other electronic means, and all such counterparts and facsimiles together constitute one

A

greement.

 

 

SIGNATURE

 

 

By signing below

,

the C

o-founder

indicates acceptance of the terms of this

A

greement in their entirety as of the date first written

above and

represents and warrants to the Company and each other Founder that he has fully read and understood this

A

greement, and that

,

to

the

C

o-f

ounder’s knowledge, no law or third-

party obligation would prevent

them

from entering into and performing this

A

greement in full. For the convenience of the

P

arties, this

A

greement may be executed electronically and in counterparts. Each counterpart shall be binding, and all of them shall constitute one and the same instrument.

 

 


IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement on the day and year set forth below.

 

 

CO-FOUNDER COMPANY

 

Authorized Signature Authorized Signature

 

Print Name and Title Print Name and Title

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 1

DESCRIPTION OF THE PRODUCT OR SERVICE

[STARTUP NAME]

 

 

 

 

Business Model

[ENTER DESCRIPTION]

Product/Service

[ENTER DESCRIPTION]

 

 


SCHEDULE 2

DESCRIPTION OF FOUNDERS’ ROLES AND RESPONSIBILITIES

 

 

 

Name and Address

Role/Title

Responsibility

[CO-FOUNDER NAME]

Address:

[TITLE]

[RESPONSIBILITY]

 

 

 

 

 


SCHEDULE 3

FORM OF COUNTERPART SIGNATURE PAGE

 

 

 

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement with effect on the [___day of_______, 20__].



[ENTER NAME OF ADDITIONAL FOUNDER]


 


SCHEDULE 4

INITIAL CAPITAL CONTRIBUTION OF THE CO-FOUNDER  

 


Name

Contribution

[CO-FOUNDER NAME]

[DOLLAR AMOUNT]