<p dir="ltr">I was reading about founders&rsquo; agreements in the UK the other day and wanted to check I have understood it properly, because most of what I find is either a generic template or written for companies that already have investors and lawyers involved. Here is what I have pieced together, and I would appreciate anyone correcting me.

<p dir="ltr">A founders&rsquo; agreement seems to be a contract between the people starting a company that sets out who owns what, who does what and what happens if someone leaves or things go wrong. It is usually separate from the articles of association, which are public at Companies House, and from a shareholders&rsquo; agreement, which tends to come later once outside investors arrive. The common view is that it should be signed early, before the company earns money or builds anything valuable, since disagreements are much harder to settle once there is something to fight over.

<p dir="ltr">The main areas it seems to cover are the equity split, each founder&rsquo;s role and time commitment, vesting and what happens to shares on departure, and ownership of intellectual property created before and after incorporation. Good leaver and bad leaver provisions come up a lot, along with decision-making rules, deadlock, confidentiality, restrictive covenants and what happens if one founder wants to sell. I keep seeing vesting over four years with a one-year cliff mentioned, though I am unsure how that works for a company that has already issued shares, and whether it creates tax issues with HMRC, such as income tax on restricted shares.



<p dir="ltr">My question is how founders decide on the equity split and whether an equal split is as risky as people say. I would also like to know whether a solicitor is worth paying for at the start or a template does the job, how people handle a co-founder who stops contributing, and whether a poorly drafted agreement ever caused problems during due diligence in a later raise. I have read something similar to this on Entrepreneur Plus, so I would like to hear from anyone who has put one in place, what they found hardest to agree on, and what they would do differently.