The Co-Founder Exit Agreement is a crucial document used when a founding member decides to leave or is required to exit a company in India. This agreement becomes necessary in various scenarios, including voluntary departure, strategic disagreements, or planned succession. It must comply with Indian corporate law, particularly the Companies Act, 2013, and related regulations governing share transfers, board changes, and statutory compliance. The document typically includes comprehensive provisions for share valuation, transfer mechanisms, confidentiality, non-compete clauses, and intellectual property rights, all tailored to Indian legal requirements. It also addresses tax implications under Indian law and ensures proper documentation for regulatory authorities. The agreement serves to protect both the departing co-founder's interests and the company's continuity while maintaining legal compliance in the Indian business environment.
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1. Parties: Identification of the departing co-founder, remaining co-founders, and the company
2. Background: Brief history of the company, current ownership structure, and reasons for exit
3. Definitions: Definitions of key terms used throughout the agreement
4. Share Transfer Terms: Details of share transfer including quantity, price, and payment terms
5. Resignation and Transition: Terms of resignation from directorship/employment and transition arrangements
6. Consideration: Financial compensation and payment structure for the departing co-founder
7. Confidentiality Obligations: Ongoing confidentiality requirements post-exit
8. Non-Compete and Non-Solicitation: Restrictions on competitive activities and employee/client solicitation
9. Intellectual Property Rights: Assignment and handling of IP rights post-exit
10. Representations and Warranties: Statements of fact by both parties regarding their capacity, ownership, and authority
11. Release and Waiver: Mutual release of claims and liabilities
12. Taxation: Tax implications and responsibilities
13. Governing Law and Jurisdiction: Applicable law and jurisdiction for dispute resolution
14. General Provisions: Standard boilerplate clauses including notices, amendments, and severability
1. Earn-Out Provisions: Used when part of the exit payment is contingent on future company performance
2. Continuing Advisory Role: Include when the departing co-founder will maintain an advisory position
3. Share Option Treatment: Required when dealing with unvested stock options or similar instruments
4. Founder Life Insurance: Needed when transferring or terminating key person insurance policies
5. Personal Guarantees: Include when addressing release from personal guarantees given to company creditors
6. Technology Transfer: Required when specific technical knowledge transfer is needed
7. International Rights: Include for companies with international operations or rights
8. Media and Public Relations: Used when specific provisions are needed for public communications about the exit
1. Share Transfer Details: Detailed breakdown of shares being transferred, including share certificates numbers and class of shares
2. Payment Schedule: Detailed payment terms, installments, and triggering events
3. Company Assets Register: List of company assets and their allocation/treatment post-exit
4. Intellectual Property Register: Comprehensive list of IP rights and their disposition
5. Outstanding Loans and Liabilities: List of any loans, guarantees, or liabilities affecting the departing co-founder
6. Resignation Letters: Template or final versions of resignation letters from various positions
7. Handover Checklist: Detailed list of items and responsibilities to be handed over
8. Post-Exit Restrictions Map: Detailed geographical and temporal scope of non-compete and non-solicitation provisions
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