Founders' agreement (export-ready)

A founders' agreement is the contract among the people starting a business that defines who owns what, who decides what, and what happens if someone leaves. Many new businesses skip this step or use a generic template they find online, on the assumption that the relationship is strong enough that the document will never matter.

In practice, the document rarely matters on the day it is signed. It matters eighteen months later, when one founder wants to take on foreign investment and the other has gone quiet. It matters when a foreign distributor asks who owns the IP and your lawyer cannot produce a clean chain of title. It matters when the business pivots into a new market and one founder argues the pivot is outside the original scope of the company.

The cost of a poorly drafted founders' agreement, or none at all, is most often paid at the moment the business is trying to grow — exactly when the founders have the least time and the most to lose. The cost of a good one, signed at formation, is a few hours of legal review and a conversation that should happen anyway.

A standard founders' agreement, written for a business that expects to operate domestically, tends to address the basics: equity split, roles, vesting, departure rules. It often omits or under-specifies several provisions that become critical when the business prepares to export:

• Clean assignment of intellectual property created before the company was formed.
• Continuing assignment of IP created after formation, including by contractors.
• Vesting terms that survive a change of control, foreign investment, or restructuring.
• Non-compete scope that does not accidentally block international market expansion.
• Decision rights for entering new jurisdictions, taking on foreign debt, or signing cross-border contracts.
• Governing law and dispute resolution mechanism that work if a founder or the company relocates.

Each of these is straightforward to include at formation and awkward to retrofit later. The rest of this guide explains what each provision does and how to think about it.

The single most common structural defect we see in businesses preparing to export is unclear ownership of intellectual property. The pattern is familiar: founders built a prototype or wrote initial code before incorporating, then continued creating IP after incorporation without a written assignment in place. When the business applies for a patent, files a trademark abroad, or signs a licensing deal, the lawyer asks for the chain of title and the founders discover that some of their IP technically belongs to the individuals, not the company.

The fix is two assignments. First, a present-tense assignment of all IP created before incorporation, from each founder to the company. Second, a continuing assignment — sometimes called a "present assignment of future IP" — that automatically vests in the company any IP created by founders or employees in the course of their work. The wording matters; a promise to assign in the future is not the same as a present assignment, and courts in some jurisdictions have read the difference narrowly.

The same logic applies to contractors. A contractor who writes code, designs a logo, or produces content without a written assignment typically retains ownership of that work, even after you have paid for it. Every contractor agreement should include a present-tense assignment of IP, with a waiver of moral rights where applicable.

Vesting is the schedule by which founders earn their equity over time, typically four years with a one-year cliff. The purpose is to ensure that a founder who leaves early does not take a full share of equity with them. Standard vesting is well understood and broadly consistent across jurisdictions.

What is less often considered is how vesting interacts with events that occur during the life of an export-oriented business. A foreign investor may require founders to re-vest a portion of their equity as a condition of investment. A change of control may accelerate vesting, or may not. A founder who relocates to lead a foreign subsidiary may ask for accelerated vesting in exchange for the move. Each of these is a normal commercial conversation; the founders' agreement should anticipate that they will happen and set a default position.

At minimum, the agreement should specify whether vesting accelerates on a change of control, what happens to unvested shares on termination for cause versus without cause, and whether the company can repurchase unvested shares on departure. These provisions can be amended later by unanimous consent, but having a sensible default avoids renegotiating under pressure.

Non-compete clauses in founders' agreements are intended to prevent a departing founder from setting up a directly competing business using what they learned. They are reasonable in principle and often poorly drafted in practice. The most common defect is geographic scope defined too narrowly — "within the Province of Ontario" — which has the unintended effect of permitting a departing founder to compete from anywhere else, including the very foreign markets the company is trying to enter.

The opposite defect is also possible: a non-compete drafted so broadly that it is unenforceable, or that blocks the company itself from pivoting into an adjacent market because a former founder argues the new direction is within scope of their restriction. Neither outcome is desirable.

A reasonable approach is to define the restricted activity by reference to the company's actual business at the time of departure, with a duration of twelve to twenty-four months and a scope that follows the company's markets rather than a fixed geography. This should be reviewed by counsel in the jurisdiction of incorporation, as enforceability varies considerably.

Founders' agreements often specify which decisions require unanimous consent and which can be made by a majority or a single founder. For an export-oriented business, the list of decisions that should require consent typically includes:

• Entering a new foreign market or establishing a foreign subsidiary.
• Signing cross-border contracts above a defined value.
• Taking on foreign debt or granting security over company assets.
• Licensing or assigning intellectual property to a third party.
• Bringing on a foreign investor or issuing new equity.
• Changing the governing law or registered office of the company.

The purpose is not to slow the business down but to ensure that decisions with structural consequences for export capability are made deliberately, by the people whose equity is affected. Day-to-day operational decisions — hiring, customer contracts within scope, marketing, product — should sit with the founder responsible for that function.

The downloadable template includes each of the provisions described above, with placeholders for the specifics of your business. It is drafted to be broadly applicable and to surface the issues you should consider.

Before signing, have the template reviewed by a lawyer qualified in the jurisdiction of incorporation. Particular attention should be paid to: the IP assignment language, which must be effective in your jurisdiction; the non-compete, which may need to be adjusted for local enforceability; and the governing law clause, which interacts with any shareholders' agreement you may later sign with investors.

This template is not a substitute for legal advice tailored to your circumstances. It is a starting point that should make your lawyer's review faster and more focused.