confidentiality agreement<\/em><\/a> to ensure a stronger level of protection of sensitive information involved. If such a document is being signed, in that case it is being used in conjunction with this founders agreement.<\/p>\nIntellectual Property Rights<\/h3>\n
In the course of cooperation between the founders, certain intellectual property rights can be created. These rights may include inventions, improvements, designs, software, trademarks, copyrights, or other proprietary rights. The text of the document must clearly outline to whom such proprietary rights shall belong.<\/p>\n
If either party wishes to license usage of certain trademarks, know-how, software or other IP to another party to this agreement, a separate licensing agreement must be used in addition to the present document.<\/p>\n
Vesting Schedule<\/h3>\n
A vesting schedule, also known as a vesting mechanism, is a legal clause that defines how founders are supposed to earn shares of the company startup within the time by continuing to work for it. It is designed to protect the company if someone leaves early by ensuring equity is earned gradually through continued involvement.<\/p>\n
For example, Party A and Party B are the founders of the new startup. They agree that the first 25 % of all shares should be given to them on the last day of the company’s first anniversary, while the remaining portion of 75 % of shares should be vested in equal instalments for the next 5 years.<\/em><\/p>\nKey Legal Consideration for a Solid Founders’ Agreement Template in Australia<\/h2>\n
A solid and professionally drafted co-founder agreement template must always address three key aspects mentioned below.<\/p>\n
Split of Equity<\/h3>\n
This section of the founders agreement usually addresses how the profits generated by the startup should be divided between the founders. The standard clause usually provides distribution of profits in proportion to each founder’s share in equity. However, there are also other ways to do it:<\/p>\n
\n- in equal shares despite being all founders;<\/li>\n
- in shares other than the amount of each founder’s interest in the equity;<\/li>\n
- certain percentage of profit in equal shares, while the remaining part is in proportion to each founder’s interest in the equity, etc.<\/li>\n<\/ul>\n
Exit Strategy<\/h3>\n
From the very start each founder should understand the exit strategy from the startup, including financial and legal consequences. This includes the notification process of other founders and the pay-off of the part of their equity upon the exit and evaluation and pay-off of any accrued profits, if available.<\/p>\n
Stakes are high, and failure to address this properly in the co-founder agreement template may result in disputes in the future.<\/p>\n
Limitation of Competition<\/h3>\n
All startups are usually at risk, as your ideas can be easily taken away by other founders if not protected properly. Therefore, a co-founder agreement startup template shall address the following:<\/p>\n