5 Things Every Co‑Founder Must Put In Writing (Before It is Too Late)

Most founder disputes do not happen because two people disagreed. They happen because two people never actually agreed in the first place - they each walked away from a conversation with a different understanding of what was decided and nobody wrote it down to find out.

By the time that gap surfaces, it is usually in front of an investor, a mediator, or a court. Here's what needs to be on paper before that ever happens.

1. Exactly who owns what, and when it is actually their's

Not "we are splitting it evenly" - the precise percentage, the vesting schedule attached to it, and the cliff period before any of it is guaranteed. Verbal equity commitments are close to worthless the moment someone wants to enforce one.

Your founders' note or agreement should capture:

• Each founder's equity percentage.
• Vesting period and cliff (e.g. 4 years with a 1-year cliff).
• What happens to unvested shares on exit (good leaver vs bad leaver).
• Whether there are any special rights (board seat, veto, etc.) at this stage.

Real pattern: We often see "50 -50" founders where one person effectively built the product and the other drifted away. Without vesting and clear leaver provisions, the remaining founder is stuck with a disengaged co-owner holding half the company.

2. Who decides what - and what happens when you do not agree

Which decisions need both founders, which need only one and what happens at a genuine deadlock. Startups die from unresolved 50 - 50 disagreements more often than from bad ideas.

At a minimum, clarify:

• Day-to-day operational decisions (who can decide alone).
• Major decisions (fundraising, key hires, pivots, large spend) that require both founders or board approval.
• A deadlock mechanism: mediation, casting vote, or some other agreed process.

This does not have to be a complex governance matrix. It just needs to be clear enough that when a tough decision arises, you are not fighting about who had the right to decide.

3. What "leaving" actually means, in writing, before it happens

A founder who leaves after two months should not walk away with the same equity as one who stays four years and builds the company. Good-leaver and bad-leaver clauses exist precisely to make that distinction - but only if they are written down before someone actually leaves.

Define, in simple terms:

• What counts as resignation, termination, or abandonment.
• How unvested equity is treated.
• Whether vested equity can be bought back, and on what terms.
• Any differences in treatment based on reason for exit (health, mutual agreement, breach, misconduct).

Real pattern: The hardest conversations happen when a founder is half-out: still on the cap table, but not contributing. A clear leaver framework makes that conversation less emotional and more mechanical.

4. Whether your non-compete will actually hold up in India

Founders routinely copy non-compete language from templates written for US or UK law. Indian courts treat post-termination restraints very differently and a clause that looks airtight on paper can be unenforceable the moment it is tested.

In India:

• Broad post-termination non-competes are generally vulnerable under contract law principles.
• Confidentiality, IP protection and carefully scoped non-solicitation (customers, employees) are more likely to be enforceable.
• Any restraint must be reasonable in time, geography and scope and tied to legitimate business interests.

Do not rely on a template non-compete. Get India-specific drafting that reflects how courts actually look at these clauses.

5. That your IP assignment survives the relationship, not just the job

If a co-founder leaves, do they still owe the company the IP they built while they were there? This needs to be explicit and it needs to outlast the working relationship itself, not expire the day someone walks out.

Your IP clause should:

• Assign all IP created in connection with the startup to the company.
• Cover both past and future work during the founder's involvement.
• State that the assignment continues to apply even after the founder exits.
• Include moral-rights waivers and cooperation obligations (e.g. signing further documents if needed).

Real pattern: Disputes over "who built what" are common when founders fall out. A clear IP assignment does not prevent arguments, but it makes the legal position much clearer.

The fear worth having

A founders' agreement is the one document you are least likely to need urgently and most likely to regret not having. Nobody drafts one expecting to use it. The ones who skip it are the ones who end up needing it most - usually right when a term sheet is on the table and there is no time left to fix the gap.

Next in this series: Your founders' agreement is signed. Now someone has to actually become a director on paper and that comes with personal legal exposure most first-time founders do not realise they have just accepted.

Next: What Every First-Time Director Must Know Before Signing the Consent Letter

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