Delaware Founders Agreement

• Category: Corporations - Officers and Employees
• State: Multi-State
• Control #: US-ENTREP-0027-2
• Format: Word; Rich Text

Description

A founders' agreement is a document created by the founders of a company to establish how the company will function. It is the product of pre-incorporation discussions that should take place among the company's founders before they establish the company. It includes provisions on ownership structure, decision making, dispute resolution, choice of law, transfer of ownership, ownership percentages, voting rights, intellectual property rights, and more.

A Delaware Founders Agreement is a legally binding contract that outlines the terms and conditions between the founders of a Delaware corporation. It is a crucial document for startup companies, as it helps establish a solid foundation for collaboration, decision-making, and ownership distribution among the founders. Delaware is a popular choice for incorporation due to its favorable business-friendly laws. Thus, Delaware Founders Agreements are commonly used by startups incorporated under Delaware law. These agreements provide clarity and safeguard the rights and responsibilities of co-founders, which helps prevent future disputes and conflicts within the company. The content of a Delaware Founders Agreement may vary depending on the specific needs and circumstances of the founders. However, there are a few common elements that are typically included in such agreements. These include: 1. Equity Distribution: The agreement specifies how the founders' shares or equity in the company will be allocated among the co-founders. It outlines the initial ownership percentages, as well as any vesting schedules or conditions for earning equity. 2. Roles and Responsibilities: It defines the roles and responsibilities of each founder within the company. This section outlines the division of labor, decision-making processes, and the extent of authority each founder holds. 3. Intellectual Property (IP) Ownership: Founders often assign the rights to intellectual property created for the company to the corporation itself. This provision ensures that any IP developed during the course of the business belongs to the company, rather than individual founders. 4. Confidentiality and Non-Disclosure: A Delaware Founders Agreement typically includes clauses to protect the company's confidential information and trade secrets. It ensures that founders maintain confidentiality and refrain from disclosing sensitive company information to third parties. 5. Non-Compete and Non-Solicitation: Some Delaware Founders Agreements may address non-compete and non-solicitation clauses. These provisions restrict founders from competing against the company or poaching employees or clients during and after their tenure within the company. There are various types of Delaware Founders Agreements that can be tailored to suit specific needs. Some types include: 1. Standard Delaware Founders Agreement: This is a comprehensive agreement that covers all the essential elements mentioned above. It is typically used by startups with multiple founders who want to establish a clear framework for working together. 2. Vesting Agreement: A vesting agreement is a specific type of Delaware Founders Agreement that primarily focuses on the vesting schedule and conditions for earning equity. It ensures that founders' ownership in the company is contingent upon continued involvement and performance. 3. Buy-Sell Agreement: A buy-sell agreement is another type of Delaware Founders Agreement that outlines the terms and conditions under which founders can buy or sell their shares. It helps address situations such as voluntary or involuntary departure, death, or disability of a founder. In conclusion, a Delaware Founders Agreement is a critical legal document for startups incorporated in Delaware. It provides a framework for collaboration, equity distribution, and decision-making among founders. Different types of Delaware Founders Agreements exist, including standard agreements, vesting agreements, and buy-sell agreements, each serving specific purposes to protect the interests of startup founders.