A UK founder agreement should cover, at a minimum, how equity is split between founders, how that equity vests over time, what happens when a founder leaves (the leaver provisions), the assignment of intellectual property to the company, and how roles and key decisions are handled. It is the document that turns a handshake between co-founders into something the business, and later its investors, can rely on. Skipping it, or relying on goodwill, is how promising startups end up in painful disputes when one founder walks away early holding a large slice of equity. This guide walks through what a founder agreement should address and why each part matters. It is general information, not legal advice, and anything with real value at stake deserves a qualified adviser.
If you want a starting document rather than only the concepts, our founder agreement template guide covers how to draft one; this piece explains what a good one needs to contain and why.
Equity split and vesting
The first and most emotionally charged question is who owns what. The equity split records each founder's shareholding, and while an equal split is common, what matters is that the number is agreed, written down, and reflects a genuine conversation about contribution, commitment and risk rather than a rushed compromise.
Far more important than the headline split, though, is vesting. Vesting means founders earn their shares over time rather than owning them all outright from day one, typically over four years with a one-year "cliff" (nothing vests until the first anniversary, then it accrues monthly). The reason is simple and worth internalising: without vesting, a co-founder who leaves after three months could keep, say, a third of the company forever, leaving the remaining founders to build the business while a departed person holds a huge stake. That scenario kills fundraises and morale alike. Vesting protects the founders who stay and is something serious investors will expect to see, so building it in early, and reflecting it in the cap table from the start, saves enormous pain later.
Vesting and the equity split are two sides of the same coin: the split says what each founder can earn, and vesting says they have to earn it by sticking around.
Leaver provisions
Closely tied to vesting is what happens when a founder actually leaves, which the agreement handles through leaver provisions. These usually distinguish between a "good leaver" (someone who leaves through no fault, such as ill health) and a "bad leaver" (someone dismissed for cause or who breaches the agreement), and they set out what happens to that person's shares in each case, often whether and at what price the company or other founders can buy them back.
The value of getting this right in advance is that it removes the worst kind of argument: the one that happens after the relationship has broken down, when nobody is inclined to be reasonable. A clear leaver clause means the outcome is already decided by rules everyone agreed to while they were still aligned. It also protects the company's ability to re-allocate equity to a replacement, which is often essential to keep building. Leaver provisions are not about expecting the worst; they are about making sure a departure, which is common in the life of a startup, does not become an existential threat to the business.
IP assignment: the clause founders forget
Here is the provision that catches founders out most often, and it is one of the most important. Everything the founders create for the business (code, designs, brand, content, inventions) is intellectual property, and by default UK law does not automatically vest all of it in the company just because the founders intend it to.
Under the Copyright, Designs and Patents Act 1988, the general rule is that the author of a work is the first owner of copyright, with an exception for works made by an employee in the course of employment, where the employer is first owner (see Sources). The problem for startups is that founders in the earliest days are often not employees of the company at all; they are individuals building something before the entity is even properly staffed. That means the IP they create can sit with them personally rather than with the company, unless it is formally assigned. A founder agreement, backed by a proper IP assignment, should ensure that all IP relevant to the business is assigned to the company. Investors will check this in diligence, and a gap here can stall or sink a funding round, because nobody wants to invest in a company that does not clearly own its own product. It is the least glamorous clause and one of the most consequential.
Roles, decisions and the rest
Beyond equity and IP, the agreement should give the founding team a working constitution for the everyday running of the business, so disagreements have a resolution path built in.
That means setting out each founder's role and responsibilities, so expectations are explicit rather than assumed, and defining how decisions get made: what needs unanimous agreement, what one founder can decide alone, and how deadlocks are broken when founders disagree. It should address time commitment (full-time versus part-time), any salary or expenses arrangements, and confidentiality obligations between founders and towards the company. Where the founders will also be directors, it is worth being conscious of directors' duties under the Companies Act, though those sit alongside the founder agreement rather than inside it. And the agreement should reference the wider corporate documents (the articles and any shareholders' agreement) so the founder-level deal fits with the company-level rules rather than contradicting them.
None of this needs to be adversarial. The point is that a founder agreement written while everyone is optimistic and aligned is the cheapest insurance a startup ever buys, because it decides the hard questions before anyone has a reason to fight about them.
How 99 Data Rooms handles this
You can draft a founder agreement in 99 Data Rooms using the AI Legal Drafting feature, which is live in the product. The important thing to understand is what it does not do: it does not write legal wording from scratch or let a language model invent clauses. It assembles a document from a library of vetted England and Wales clauses, selecting the right ones based on your answers, so you get a current, sensible baseline rather than something a model dreamed up. The founder agreement sits among the 17 vetted England and Wales templates, alongside the IP assignment you will likely want to pair it with.
From there the document flows through the rest of the platform. You can share the draft with your co-founders as a tracked, revocable link behind a verified-email gate, keep the sensitive parts (like the cap table it references) controlled, and when everyone is happy, send it for signature in the browser with an audit certificate recording who signed, when and their intent. If your agreement needs to touch newer areas such as AI-generated work, our guide on AI clauses in agreements is worth a read. Because drafting, sharing and signing all live in one place, the founder agreement never becomes a stray Word file emailed around; it stays a controlled document from first draft to signature. The drafting and template library page shows the full set.
Draft your founder agreement for free
You can draft a founder agreement from vetted England and Wales clauses, share it with your co-founders under control, and sign it in the browser, all inside 99 Data Rooms. The free tier is genuinely free (three rooms, twenty-five active links, forever, no card). Start for free, assemble the document from the drafting library, and get the founding team's deal in writing while everyone is still aligned. The platform is in beta and improving fast, but drafting, sharing and signing already work end to end.
Sources
- Copyright first ownership, and the employee exception relevant to founder IP: Copyright, Designs and Patents Act 1988, s.11, https://www.legislation.gov.uk/ukpga/1988/48/section/11
- Directors' duties (relevant where founders are also directors): Companies Act 2006, Part 10, Chapter 2, https://www.legislation.gov.uk/ukpga/2006/46/part/10/chapter/2
Do co-founders really need a written founder agreement?
Yes. Relying on a verbal understanding is how equity disputes start, especially when a founder leaves early. A written agreement fixes the equity split, vesting, leaver terms and IP assignment while everyone is aligned, which is far cheaper than resolving those questions in a dispute later. Investors will also expect to see one. This is general information, not legal advice.
What is vesting and why does it matter so much?
Vesting means founders earn their shares over time (commonly four years with a one-year cliff) rather than owning them all immediately. It protects the founders who stay if one leaves early, because the departing founder only keeps what they have earned. Without it, an early leaver can retain a large stake forever, which damages the company and deters investors.
Why is IP assignment such a common problem for startups?
Because under the Copyright, Designs and Patents Act 1988 the author of a work is usually its first owner, with an exception for employees acting in the course of employment (see Sources). Early founders often are not employees, so IP they create can sit with them personally unless formally assigned to the company. Investors check this in diligence, so a gap can stall a raise.
Is a founder agreement the same as a shareholders' agreement?
They overlap but are not identical. A founder agreement focuses on the founding team's deal (roles, vesting, leaver terms, IP), while a shareholders' agreement governs the wider body of shareholders and sits alongside the company's articles. They should be consistent with each other. For anything material, take advice on how the documents fit together.
Can I draft a founder agreement myself?
You can draft a solid baseline from vetted clauses, which is a good starting point, but a founder agreement allocates real equity and real risk, so a human review is wise before you rely on it. The AI Legal Drafting feature in 99 Data Rooms assembles vetted England and Wales clauses and never invents them, giving you a current draft to take to an adviser. This is general information, not legal advice.