The agreement should clearly specify the arrangements for the provision of additional financial resources by the co-founders of the growth of the company, i.e. whether the additional funds are to be provided by the parents in the form of equity or debt, the method of valuation of own funds when the financing is provided by own funds and the interest rate to be paid by the company, whether the financing is debt financing. Another important aspect to take into account in the agreement is the right and restrictions of the founders to transfer their shares in the company. The contract may provide for a lock-in clause prescribing the number of years during which the co-founder may not transfer his shares in the company. The agreement provides a mechanism to deal with a situation in which the co-founder wishes to leave the company before the expiry of the prohibition period. It is important to determine the method of valuation of the shares and the dilution rights associated with the shares. Due to the nature of their ties to the company, the founders are aware of a lot of confidential information about the company, some of which may constitute trade secrets. The parents should be contractually prevented from disclosing confidential information received by such a co-founder in the course of his or her relationship with the company, which may cause irreparable harm to the company`s activities. The business start-up contract is an official contract or legal agreement concluded between the co-founders of the company when setting up a company. This agreement describes the roles, rights and obligations, responsibilities, property rights, commitments and investment share of each founder. The above list of essential clauses of a co-founder agreement is not exhaustive and founders may contain other essential elements depending on the nature of the business and the relationship between them. A business creation agreement is concluded between two or more partners, jointly called “co-partners”, “Shareholder”, “Party(s). In the event of a dispute between the co-founders, an appropriate dispute settlement mechanism should be put in place.
For example, if the founders mutually agree to terminate the business, the most preferred option to resolve this dispute is arbitration, mediation, etc. .