eSign Your Founders Agreement with Aadhaar

A Founders Agreement is a pre-incorporation contract between the co-founders of a startup that sets out the core commercial and governance terms of their working relationship. It covers the things that matter most in the early days: who owns how much equity, how that equity vests over time, who handles which functional areas, how decisions are made, what happens if a co-founder leaves, and who owns the IP created before and during the startup's life. Most seasoned founders consider the founders agreement to be the single most important document in the early stages of a startup, because it prevents the painful and expensive co-founder disputes that derail a significant percentage of early-stage companies.

The founders agreement is typically signed before the company is formally incorporated, which makes it a pre-incorporation contract under the Indian Contract Act, 1872. This means it binds the co-founders personally until the company is incorporated and adopts the agreement, after which the company also becomes a party. The agreement is not filed with any government authority, so it is essentially a private contract between the founders. Once the company is incorporated and especially once external investors come in, the founders agreement is usually superseded by a combination of the Articles of Association, a Shareholders Agreement (SHA), and individual employment agreements for each founder.

Key commercial issues that a founders agreement should address include: the equity split between the founders (with clear reasoning for the allocation), a vesting schedule (typically 4 years with a 1 year cliff), good leaver and bad leaver provisions that determine what happens to unvested and vested equity if a founder leaves, IP assignment from each founder to the company for any work product created before and during the startup, roles and responsibilities of each founder, decision rights and governance (majority vs unanimous consent on key decisions), non-compete and non-solicitation obligations on the founders, compensation and expense reimbursement policies, and dispute resolution. Each of these areas has known failure modes that a well-drafted agreement can prevent.

An important Indian legal nuance is that non-compete obligations on founders after they leave the company are generally not enforceable under Section 27 of the Indian Contract Act, 1872, which voids agreements in restraint of trade. Indian courts have consistently refused to enforce broad post-employment non-competes, though narrow non-solicitation of employees and customers is usually enforceable. Founders agreements should therefore focus on strong non-compete during the employment term (which is enforceable) and narrow post-termination non-solicitation (which is enforceable) rather than broad post-termination non-compete (which is not).

Aadhaar eSign is a natural fit for founders agreements because all co-founders in Indian startups typically have Aadhaar, and the agreement needs to be signed early, before the formal incorporation process is complete. SignSetu lets co-founders sign from their own cities, which matters for founding teams that are remote or distributed. The entire process takes under ten minutes from upload to final signed PDF.