Founders’ Agreement

Also known as: Founders Agreement, Founder Agreement, Co-founder Agreement, Kurucular Sözleşmesi

In short

An agreement in which a venture's founders set out, before incorporation or the first investment, the share split, roles, intellectual property, vesting and departure rules.

A founders’ agreement is an agreement in which a venture’s founders put in writing the basic rules for working together. It is usually made before incorporation or the first funding round. Investors also want the relationship between founders to be clear and intellectual property to be held by the company before investing.

Key Provisions

Share split: The founders’ percentages and the contributions on which they are based,
Vesting and cliff: Founders’ shares being earned over time,
Roles and time commitment: Each founder’s role, full-time commitment and title,
Intellectual property: Assignment to the company of software, designs, trademarks and other creations developed for the venture,
Decision-making: How key decisions are made and how disagreements between founders are resolved,
Non-compete and confidentiality: Founders not running another business in the same field,
Departure: What happens to a founder’s shares on departure; see Leaver Provisions.

Assigning Intellectual Property to the Company

The economic rights in software and other works developed by founders before incorporation generally remain with the person who created them. Under the Law on Intellectual and Artistic Works, agreements assigning economic rights must be in writing and specify the assigned rights individually (Art. 52). After incorporation, if a founder works under an employment contract, the economic rights in works created in the course of duty generally belong to the employer; but confirming this contractually is recommended. This is one of the first things investors check in due diligence.

Before Incorporation

The relationship between founders working together before a company is set up may be characterised as a simple partnership under the Turkish Code of Obligations. In a simple partnership, partners may be personally liable for partnership debts. It is therefore recommended to incorporate as early as possible and carry the provisions of the founders’ agreement over into the articles of association and the shareholders’ agreement after incorporation.

Frequently Asked Questions

When should a founders' agreement be made?

Ideally when the founders start working together, before incorporation or the first investment. Most disputes arise from expectations that were not put in writing at the start.

Does software developed by a founder automatically belong to the company?

No. The economic rights in works a founder developed before incorporation or without an employment contract generally remain with the founder. For these rights to pass to the company, a written assignment agreement must be made and the rights assigned must be specified individually.

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