Drafting a founders agreement for an Australian startup
A founders agreement governs the relationship between co-founders pre-Seed. It typically includes equity split, reverse vesting, IP assignment, decision-making rights, leaver provisions, and a pathway to a full shareholders agreement at the first external round.
This is an 8-step workflow for drafting a founders agreement that sets out equity split, vesting, decision rights, and IP ownership for an Australian startup before outside capital comes in.
Before you start
- Company incorporated (Pty Ltd) or about to be incorporated
- Confirmed equity split and roles among founders
- List of IP contributed by each founder to date
- Any external obligations (existing employment, university ownership, prior venture IP)
The workflow
Confirm corporate structure
Confirm the company is a Pty Ltd under the Corporations Act, identify directors and shareholders, and check whether a family trust or holding vehicle is required for any founder.
Document the equity split
Record the agreed share allocation and any ordinary vs preference classes. Cross-check against the constitution and any existing share register.
Draft reverse vesting provisions
Draft reverse vesting (typically 4 years with a 1-year cliff) so the company can buy back unvested shares if a founder leaves. Address accelerated vesting on change of control.
Draft IP assignment and moral rights consent
All pre-existing and future IP created by founders for the company should be assigned. Include a moral rights consent under s 195AW of the Copyright Act.
Set leaver provisions
Distinguish between good leavers (death, disability, termination without cause) and bad leavers (resignation, termination for cause). Attach buy-back pricing to each.
Draft decision rights and reserved matters
Agree on board composition, founder vote thresholds, and reserved matters requiring unanimous founder approval (e.g. raising capital, taking on debt, hiring above a salary cap).
Add dispute resolution and deadlock
Include tiered dispute resolution (mediation, then arbitration or court). For deadlock, consider a shotgun clause or independent director tiebreaker.
Execute and update the corporate record
Execute the agreement, update the ASIC register, issue share certificates, and file any Form 484 changes within 28 days.
What you will have at the end
An executed founders agreement aligned with the Corporations Act and ready to withstand investor due diligence at the first external round.
Common issues
- Equity splits set before real contribution is visible, creating dead equity
- Missing reverse vesting, leaving the company unable to recover shares from a departing founder
- IP assignment gaps where founders worked on the idea before incorporation
- Conflicts with existing employer IP clauses (common for technical founders still employed)
- Over-engineered reserved matters that make operational decisions unworkable
Run this workflow on a real matter
Quillio drafts founders agreements with vesting, IP assignment, and leaver provisions calibrated to your cap table, and flags conflicts with current employment clauses. See /practice-areas/commercial-lawyers.
This workflow is a general guide. Founders agreements should be refreshed at each capital raise — do not treat them as a one-time document.
Try this workflow with Quillio.
Quillio can run this workflow on a real matter, with citations to current AU authority on every step. The free trial requires no credit card.
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