Is this clause library the same as a founders' agreement generator?

No. The library explains and organises clause content, while the main founders' agreement page is used to generate a complete document.

Can I use this library before creating a founders' agreement?

Yes. The clause library can help you understand clause options before generating a customised founders' agreement on the main category page.

What is a founder vesting clause?

Founder vesting clauses set rules for how founders earn or retain shares over time, often protecting the company if a founder leaves early.

Why is an intellectual property clause important in a founders' agreement?

An IP assignment clause helps ensure that intellectual property created by founders for the business belongs to the company or relevant business entity.

What is a founder leaver clause?

A leaver clause explains what happens to a founder's shares, rights, or obligations if they resign, are removed, or stop working for the business.

What does a decision-making clause do in a founders' agreement?

A decision-making clause sets out how founders approve important matters, such as funding, hiring, spending, share issues, or business strategy.

What governing law is used for a UK founders' agreement?

UK founders' agreements often use English law and courts, but the correct governing law depends on the company structure and circumstances.

Are non-compete clauses enforceable in UK founders' agreements?

Non-compete clauses may be difficult to enforce unless they are reasonable, limited in scope, and protect a legitimate business interest under UK law.

Should a founders' agreement include confidentiality clauses?

Yes. Many founders' agreements include confidentiality clauses to protect business plans, technical information, customer data, financial details, and trade secrets.

Can founders' agreement clauses be changed later?

Yes. A founders' agreement can usually be amended if all required parties agree and the amendment is properly documented.

Does this clause library provide legal advice?

No. The clause library is for general information and document support only. You should seek legal advice for complex, high-value, or unusual arrangements.

EN-GB>Corporate>Founders' Agreement>United Kingdom Founders' Agreement Clauses

United Kingdom Founders' Agreement Clause Library

Created: 9 Jun 2026

This clause library helps founders compare practical agreement terms for equity, decision-making, vesting, exits, and dispute prevention. Use it alongside our AI Generated British Shareholders Agreement resources to draft clearer, more relevant documents.

Clause Name	Purpose	Typical Importance	Key Considerations	Example Use Case
Equity and ownership
Foundersu0027 Equity Split	Records each founderu0027s initial shareholding and ownership percentage.	High	Contributions, cash invested, IP brought in, future workload and tax treatment.	Two founders agree a 60:40 split because one contributes existing software.
Share Vesting	Makes founders earn shares over time or against milestones.	High	Vesting period, cliff, acceleration, leaver rules and tax consequences.	A startup uses four-year vesting so an early leaver cannot keep all equity.
Vesting Cliff	Delays vesting until a minimum service period has passed.	High	Common cliff length, fairness, retention effect and treatment of early dismissal.	No founder shares vest unless the founder stays for at least 12 months.
Reverse Vesting	Allows the company or founders to buy back unvested shares.	High	Buyback mechanism, articles alignment, consideration and share capital rules.	A founder receives shares upfront but unvested shares are repurchased on departure.
Share Classes	Defines different rights attached to ordinary, growth or preference shares.	Medium	Voting, dividends, capital rights, investor expectations and articles consistency.	A company creates non-voting growth shares for an incoming technical founder.
Capital Contributions	Records money, assets or services each founder must contribute.	High	Payment dates, consequences of non-payment, valuation and whether funds are loans.	Each founder agrees to contribute £10,000 working capital by completion.
Founder Loans	Sets repayment terms for money lent by founders to the company.	Medium	Interest, repayment priority, conversion rights, tax and insolvency risk.	A founder funds early product development through a repayable director loan.
Future Share Issues	Controls when the company may issue new shares.	High	Dilution, investor rounds, pre-emption rights and required founder approval.	Founders require unanimous consent before issuing shares to a new investor.
Pre-Emption On New Shares	Gives existing shareholders first refusal on new share issues.	High	Statutory rights, disapplication, investor exclusions and timing.	A founder can maintain their percentage during a small friends-and-family round.
Anti-Dilution Protection	Protects founders or investors from excessive dilution in later rounds.	Medium	Weighted average formula, founder fairness and investor negotiation impact.	A founder seeks protection if a down round occurs within 12 months.
Option Pool	Reserves shares for employees, consultants or advisers.	Medium	Pool size, founder dilution, EMI eligibility and board approval.	A startup creates a 10% EMI option pool before hiring senior staff.
Dividend Policy	Sets expectations for distributing profits to shareholders.	Medium	Available profits, reinvestment strategy, tax and board discretion.	Founders agree profits will be reinvested until annual revenue exceeds a threshold.
Profit Sharing	Explains how profits are shared if not strictly by shareholding.	Low	Company law limits, dividend rules, employment income and tax treatment.	A sales founder receives a bonus-based profit share separate from dividends.
Roles and responsibilities
Founder Remuneration	Sets salary, fees or deferred compensation for founders.	High	PAYE, NIC, affordability, employment status and board approval.	Founders agree no salaries until the company raises seed funding.
Founder Roles	Allocates operational responsibilities between founders.	High	Job titles, authority limits, reporting, accountability and skills gaps.	One founder leads product while another manages finance and fundraising.
Time Commitment	Requires founders to devote agreed time to the business.	High	Full-time status, side jobs, caregiving, illness and objective measurement.	A part-time founder must move full-time after a funding round closes.
Performance Milestones	Links obligations or equity to agreed business milestones.	Medium	Clear metrics, deadline control, evidence and consequences of failure.	A CTO receives additional equity after delivering the MVP.
Company administration
Director Appointment	States which founders may be appointed as directors.	High	Articles, Companies House filings, board size and investor director rights.	Each co-founder has the right to be appointed as a director while employed.
Roles and responsibilities
Director Duties Acknowledgement	Reminds founder-directors of their statutory duties.	High	Conflicts, independent judgment, company benefit and duty to promote success.	Founder-directors confirm they understand duties under sections 171 to 177.
Founder Employment Status	Clarifies whether a founder is employee, worker, consultant or director only.	High	Employment rights, tax, IP ownership, dismissal and documentation.	A technical founder starts as a consultant before joining as an employee.
Outside Activities	Restricts side projects, jobs or interests that may distract or conflict.	Medium	Scope, consent process, existing commitments and enforceability.	A founder must disclose a consultancy role for a related business.
Conflict Of Interest	Requires disclosure and management of personal interests.	High	Disclosure timing, voting restrictions, authorisation and records.	A founder owns shares in a supplier and must disclose the interest.
Business Opportunities	Prevents founders from taking company opportunities personally.	High	Opportunity definition, approval exceptions and director duties.	A founder cannot divert a customer lead to their separate company.
Decision making
Board Composition	Sets the number and identity of directors on the board.	High	Founder representation, investor seats, chair role and quorum.	Three founders agree each will hold one board seat.
Board Meetings	Sets frequency, notice and format of board meetings.	Medium	Notice, remote attendance, agenda, minutes and urgent decisions.	The board meets monthly by video call with written minutes kept.
Board Quorum	States who must be present for board decisions to be valid.	High	Founder presence, adjourned meetings and deadlock risk.	At least one technical and one commercial founder must attend key meetings.
Shareholder Voting Thresholds	Sets voting percentages needed for shareholder approvals.	High	Ordinary resolutions, special resolutions, veto rights and minority protection.	Issuing shares requires 75% approval instead of a simple majority.
Reserved Matters	Lists major decisions requiring special founder or investor consent.	High	Funding, hiring, debt, budgets, acquisitions, share issues and veto abuse.	No founder can sell core IP without unanimous approval.
Founder Veto Rights	Gives a founder consent rights over specified decisions.	Medium	Minority protection, deadlock risk, expiry and misuse.	A minority founder can block any sale of the company before year three.
Chair And Casting Vote	Appoints a chair and decides whether they have a tie-break vote.	Medium	Fairness, deadlock prevention, founder equality and articles consistency.	A three-director board gives the independent chair a casting vote.
Budget Approval	Requires approval of annual budgets and material spending.	Medium	Approval threshold, overspend limits, emergency costs and reporting.	Any spend above £25,000 requires board approval.
Company administration
Banking Authority	Controls who may operate bank accounts and approve payments.	Medium	Dual authorisation, spending limits, fraud controls and online banking access.	Payments over £5,000 require approval from two founders.
Dispute management
Deadlock Resolution	Provides a process when founders cannot agree on key decisions.	High	Escalation, mediation, buy-sell rights and avoiding forced unfair exits.	Equal 50:50 founders disagree on accepting an acquisition offer.
Russian Roulette Buy-Sell	Allows one founder to set a price to buy or sell shares.	Low	Financial imbalance, valuation fairness, funding ability and coercion risk.	Two equal founders need a final exit mechanism after mediation fails.
Texas Shoot-Out	Uses sealed bids to determine who buys the other founderu0027s shares.	Low	Funding disparity, valuation uncertainty and suitability for 50:50 companies.	Two founders each want sole control after a strategic breakdown.
Mediation	Requires disputes to be mediated before court proceedings.	Medium	Mediator selection, timing, confidentiality and urgent injunction exceptions.	Founders must attend mediation before starting an unfair prejudice claim.
Expert Determination	Refers technical or valuation disputes to an independent expert.	Medium	Expert appointment, finality, costs, evidence and scope of questions.	An accountant determines fair value for a departing founderu0027s shares.
Arbitration	Sends disputes to private arbitration instead of court.	Low	Seat, rules, cost, confidentiality and enforceability of awards.	International founders want confidential binding dispute resolution in London.
Leaving the company
Good Leaver	Defines favourable treatment for founders leaving in accepted circumstances.	High	Death, disability, redundancy, illness, dismissal without cause and share price.	A founder leaving due to serious illness may keep vested shares.
Bad Leaver	Penalises founders leaving after misconduct or serious breach.	High	Trigger events, fairness, employment law, valuation discount and enforceability.	A founder dismissed for fraud must sell shares at nominal value.
Compulsory Transfer On Exit	Requires a departing founder to sell some or all shares.	High	Trigger events, buyer, price, payment timing and articles alignment.	A resigning founder must offer shares to the remaining founders first.
Share Transfer Restrictions	Limits when founders can sell or transfer shares.	High	Permitted transfers, family trusts, investor consent and articles wording.	No founder may sell shares to a competitor without board consent.
Right Of First Refusal	Gives existing shareholders first chance to buy shares being sold.	High	Offer process, valuation, matching rights, deadlines and permitted transfers.	A founder must offer shares to co-founders before selling to a third party.
Tag-Along Rights	Lets minority founders join a majority share sale on the same terms.	Medium	Trigger percentage, sale terms, minority protection and investor expectations.	A minority founder joins a sale led by the majority founder.
Drag-Along Rights	Allows majority holders to force minority shareholders into a sale.	Medium	Approval threshold, minimum price, buyer identity and minority safeguards.	An acquirer requires 100% ownership before completing a trade sale.
Founder Death Or Incapacity	Sets what happens if a founder dies or cannot work.	Medium	Insurance, estate rights, buyout pricing and business continuity.	The company buys back shares from a deceased founderu0027s estate.
Founder Divorce Or Bankruptcy	Protects the company from involuntary share transfers.	Medium	Family court orders, trustees in bankruptcy, pre-emption and valuation.	A founderu0027s bankruptcy triggers a right for others to buy their shares.
Confidentiality and IP
Confidentiality	Protects business secrets, plans, customer data and financial information.	High	Definition, exclusions, duration, disclosure permissions and remedies.	Founders keep pitch decks, code and customer lists confidential.
Trade Secrets Protection	Protects information that has commercial value because it is secret.	High	Reasonable protection steps, permitted disclosures and evidence of secrecy.	A founder handles proprietary algorithms and supplier pricing models.
IP Assignment	Transfers foundersu0027 intellectual property rights to the company.	High	Written assignment, pre-existing works, moral rights and future rights.	A founder assigns source code created before incorporation to the company.
Pre-Existing IP	Identifies IP a founder owned before joining the company.	High	Ownership evidence, licence scope, exclusions and investor due diligence.	A founder licenses an existing analytics library to the startup.
Moral Rights Waiver	Waives certain personal rights in copyright works where permitted.	Medium	Written waiver, creative works, attribution, integrity rights and limits.	A designer-founder waives attribution rights in branding assets.
Inventions And Patents	Allocates ownership and filing duties for patentable inventions.	Medium	Inventorship, employee inventions, assignment, prosecution costs and confidentiality.	A hardware startup decides who owns patentable prototypes.
Open Source Software	Controls use of open source code in company products.	Medium	Licence terms, copyleft risk, attribution, audit trail and customer warranties.	A SaaS startup restricts GPL code in proprietary backend software.
Domain Names And Accounts	Ensures business domains, social accounts and cloud accounts belong to the company.	Medium	Registrant details, password control, MFA, transfer on exit and evidence.	A founder registers the company domain in their personal name.
Data Protection Responsibilities	Allocates responsibility for handling personal data lawfully.	High	Controller roles, security, lawful basis, ICO registration and breach process.	A health-tech founder manages customer onboarding and sensitive user data.
Non-Compete	Restricts founders from competing with the company.	Medium	Duration, geography, business scope, legitimate interest and enforceability.	A founder leaving a fintech startup cannot launch a direct rival for six months.
Non-Solicitation Of Customers	Stops founders poaching customers after leaving.	Medium	Restricted customers, duration, contact history and legitimate interest.	A sales founder cannot approach customers they handled in the last year.
Non-Solicitation Of Staff	Stops founders poaching employees, contractors or advisers.	Medium	Who is protected, duration, seniority and recruitment exceptions.	A departing founder cannot hire the startupu0027s lead developer for 12 months.
Dispute management
Non-Disparagement	Prevents founders making damaging statements about the company or each other.	Low	Whistleblowing, truthful statements, legal disclosures and scope.	A founder exit settlement includes mutual non-disparagement wording.
Company administration
Announcements And Publicity	Controls public statements, press releases and social media announcements.	Low	Approval process, investor announcements, confidentiality and brand risk.	No founder may announce a funding round before completion.
Confidentiality and IP
Company Name And Branding	Allocates responsibility for company name, brand and trade mark matters.	Medium	Trade mark clearance, ownership, domain names and brand approvals.	A founder designed the logo before incorporation and assigns it to the company.
Company administration
Company Formation Obligations	Sets duties for incorporation and initial filings.	Medium	Company name, registered office, articles, share allotments and PSC records.	Founders agree who will incorporate the company and file initial forms.
Articles Of Association Consistency	Ensures the agreement aligns with the companyu0027s articles.	High	Share transfers, voting, class rights, precedence and public filing.	Leaver provisions are mirrored in the articles to bind future shareholders.
Shareholder Register And Filings	Allocates responsibility for statutory registers and Companies House filings.	Medium	Members register, PSC register, confirmation statements and filing deadlines.	A founder-company secretary maintains registers after each share transfer.
PSC Register Compliance	Requires disclosure of persons with significant control.	Medium	Control thresholds, updating duties, nominee holdings and Companies House filings.	A founder holding over 25% is recorded as a PSC.
Accounting Records	Allocates responsibility for keeping proper accounting records.	Medium	Bookkeeping, access rights, accounts deadlines, audit and tax records.	The finance founder must maintain Xero records and monthly management accounts.
Information Rights	Gives founders access to financial and operational information.	Medium	Reporting frequency, confidentiality, shareholder rights and sensitive data.	A non-executive founder receives monthly revenue and cash runway reports.
Tax Cooperation	Requires founders to cooperate on tax filings and elections.	Medium	Share valuations, section 431 elections, EMI filings and PAYE reporting.	Founders sign tax elections after receiving restricted shares.
Expenses Policy	Sets rules for reimbursement of business expenses.	Low	Receipts, approval limits, travel, personal costs and tax compliance.	A founder must get approval before claiming overseas conference costs.
Insurance	Requires suitable business, D&O or key person insurance.	Low	Cover type, premiums, exclusions, investor requirements and key person risk.	The company obtains key person insurance for a sole technical founder.
Founder Warranties	Records promises about capacity, ownership, IP and no conflicts.	Medium	Accuracy, disclosure, remedies, reliance and investor due diligence.	Each founder warrants they own the IP they are contributing.
Dispute management
Indemnities	Requires a founder to cover specified losses caused by breach.	Medium	Scope, caps, exclusions, proof of loss and director indemnity limits.	A founder indemnifies the company for losses from undisclosed third-party IP claims.
Limitation Of Liability	Caps or excludes certain claims between founders.	Medium	Fraud carve-outs, deliberate breach, reasonableness and statutory limits.	Liability for ordinary breach is capped at the value of a founderu0027s shares.
Restrictive Covenant Severance	Allows unenforceable restrictions to be severed where possible.	Low	Drafting precision, separate restrictions and enforcement risk.	A court can remove excessive words from a non-compete clause if validly severable.
Company administration
Term And Termination	States when the agreement starts, ends and which clauses survive.	Medium	Survival of confidentiality, IP, leaver, dispute and restrictive clauses.	Confidentiality and IP obligations survive after a founder sells all shares.
Deed Execution	Provides for execution as a deed where appropriate.	Medium	Consideration, witness requirements, company execution and limitation periods.	IP assignment and share transfer obligations are executed as a deed.
Dispute management
Governing Law And Jurisdiction	Chooses the law and courts for the agreement.	High	England and Wales, Scotland or Northern Ireland court choice and overseas founders.	UK founders choose English law and English courts for certainty.
Company administration
Notices	Sets how formal notices must be served.	Low	Email validity, postal addresses, deemed receipt and overseas founders.	A leaver notice must be sent by email and recorded delivery.
Entire Agreement	Limits reliance on previous discussions not included in the agreement.	Medium	Fraud carve-out, side letters, pitch promises and prior term sheets.	A founder cannot rely on an old email promising extra equity.
Variation	Sets how the agreement may be amended.	Medium	Written consent, unanimous approval, investor consent and articles changes.	All founders must sign any amendment to vesting terms.
Assignment Of Agreement	Controls whether rights under the agreement can be transferred.	Low	Group companies, successors, investor transfers and personal obligations.	The company may assign IP enforcement rights to a group company after restructuring.
Third Party Rights	States whether non-parties can enforce the agreement.	Low	Group companies, investors, employees and exclusion of statutory rights.	An investor is allowed to enforce confidentiality obligations directly.
Counterparts And Electronic Signature	Allows signing in separate copies and electronically.	Low	Witnessing deeds, identity checks, platform evidence and overseas signers.	Remote founders sign the agreement using an e-signature platform.

What Clauses Should A UK Founders\u0027 Agreement Usually Prioritise?

Equity, vesting, IP assignment, decision making and founder exits are usually the highest-risk areas. These clauses determine who owns the company, who controls key decisions, whether the company owns its technology and brand, and what happens if a founder leaves early.

Why Does IP Ownership Need Special Attention In The UK?

In the UK, founders should not assume the company automatically owns everything created before incorporation or outside employment. Copyright and other rights may need a written assignment, and patent rights can depend on inventorship and entitlement. A founders\u0027 agreement should work alongside employment, consultancy and IP assignment documents.

How Do Founder Exit Clauses Reduce Disputes?

Good leaver, bad leaver, vesting, compulsory transfer and drag/tag provisions help avoid deadlock when a founder resigns, is dismissed, becomes incapacitated or stops contributing. Without clear terms, a departed founder may retain shares and voting power despite no longer working in the business.

Which UK Legal Points Often Affect Founders\u0027 Agreements?

Companies Act 2006: share transfers, directors\u0027 duties, conflicts, dividends and company administration must be consistent with company law and the articles of association.
Employment and tax: salary, consultancy status, share options and vesting can create PAYE, NIC, employment rights and EMI option issues.
Data protection and confidentiality: clauses handling personal data, trade secrets and customer information should align with UK GDPR, the Data Protection Act 2018 and the Trade Secrets Regulations.
Competition restrictions: non-compete and non-solicitation clauses must be carefully limited to be enforceable under English law.

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FAQs

What is the United Kingdom Founders' Agreement Clause Library?

It is a structured collection of common clauses used in UK founders' agreements, designed to help you understand the provisions that may appear in a founders' agreement.

What type of founders' agreement does this clause library cover?

What clauses are commonly included in a UK founders' agreement?

What is a founders' agreement?

Why do UK startup founders need a founders' agreement?

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