Co-Founder Agreement (UK)
CO-FOUNDER AGREEMENT
This Co-Founder Agreement (the "Agreement") is entered into on [Agreement Date] between:
(1) [Founder 1 Name] of [Founder 1 Address] ("Founder 1"); and
(2) [Founder 2 Name] of [Founder 2 Address] ("Founder 2").
Together referred to as the "Founders" and individually as a "Founder".
This Agreement relates to [Company Name] (company number [Company Number], registered office at [Company Address]) (the "Company").
BACKGROUND
The Founders wish to work together to build the Company's business, which involves [Business Description]. This Agreement sets out the terms governing the Founders' relationship with each other and with the Company.
ROLES AND RESPONSIBILITIES
1.1 Founder 1 ([Founder 1 Name]) shall serve as [Founder 1 Role] of the Company and shall be primarily responsible for the areas of business within their area of expertise as agreed by the Founders from time to time.
1.2 Founder 2 ([Founder 2 Name]) shall serve as [Founder 2 Role] of the Company and shall be primarily responsible for the areas of business within their area of expertise as agreed by the Founders from time to time.
1.3 Each Founder shall devote substantially all of their working time and attention to the business of the Company unless otherwise agreed in writing by the other Founders.
EQUITY
2.1 Subject to the vesting provisions in clause 3, the Founders' equity interests in the Company shall be as follows:
- [Founder 1 Name]: [Founder 1 Equity]% of the Company's issued share capital
- [Founder 2 Name]: [Founder 2 Equity]% of the Company's issued share capital
2.2 The equity split above reflects the Founders' agreement as to each Founder's relative contribution to the Company and may only be amended by written agreement of all Founders.
EQUITY VESTING
3.1 Each Founder's shares in the Company shall be subject to vesting on a [Vesting Schedule] basis, commencing on the date of this Agreement.
3.2 Vested shares shall be retained by a Founder in all circumstances. Unvested shares shall be subject to compulsory transfer at nominal value if a Founder ceases to be involved with the Company before their shares are fully vested.
3.3 Notwithstanding clause 3.2, the Founders may agree in writing to accelerate vesting in particular circumstances, including upon a sale of the Company.
3.4 The vesting mechanism shall be implemented through appropriate provisions in the Company's articles of association and/or individual founder service agreements.
DECISION-MAKING
4.1 Day-to-day operational decisions within each Founder's area of responsibility may be made by that Founder acting alone.
4.2 The following matters shall require [Major Decision Threshold]:
- Issuing new shares or admitting new investors
- Taking on material debt or financial facilities
- Making key hires or terminating senior employees
- Entering into material contracts (above £10,000 in value)
- Changing the Company's business direction or strategy
- Amending the Company's articles of association
- Initiating a sale, merger, or winding-up of the Company
4.3 In the event of a deadlock between the Founders on any matter requiring unanimous agreement, the Founders shall seek to resolve the dispute by good-faith negotiation for a period of 30 days before either party may invoke the dispute resolution provisions of clause 9.
COMPENSATION
5.1 With effect from the date of this Agreement:
- [Founder 1 Name] shall receive an annual salary of £[Founder 1 Salary]
- [Founder 2 Name] shall receive an annual salary of £[Founder 2 Salary]
5.2 Founder salaries shall be reviewed annually and may be adjusted by [Major Decision Threshold] having regard to the Company's financial performance.
INTELLECTUAL PROPERTY
6.1 With effect from [IP Assignment Date], each Founder hereby assigns (and agrees to execute all documents necessary to give effect to such assignment) to the Company absolutely all intellectual property rights — including copyright, patents, trade marks, designs, trade secrets, and know-how — that are: (a) relevant to the Company's business; and (b) created, developed, or conceived by that Founder, whether alone or jointly, before or after the date of this Agreement.
6.2 This assignment is made for good and valuable consideration, the receipt and sufficiency of which each Founder acknowledges.
6.3 Each Founder warrants that they have the right to make the assignment in clause 6.1 and that doing so will not infringe the rights of any third party.
6.4 The obligations in this clause 6 shall survive the termination of this Agreement and any Founder's departure from the Company.
CONFIDENTIALITY
7.1 Each Founder undertakes to keep confidential and not disclose to any third party any confidential information of the Company or the other Founders, both during the term of this Agreement and for a period of three years after it ends.
7.2 This obligation does not apply to information that is or becomes publicly available otherwise than through a breach of this clause, or that is required to be disclosed by law.
NON-COMPETE AND NON-SOLICITATION
8.1 Each Founder agrees that, during the term of this Agreement and for a period of 12 months following their departure from the Company, they will not: (a) directly or indirectly engage in or assist any business that is in material competition with the Company; or (b) solicit or attempt to solicit any employee, contractor, customer, or supplier of the Company away from the Company.
8.2 The restrictions in clause 8.1 apply only to the extent necessary to protect the Company's legitimate business interests and shall be read as narrowly as possible to give them effect.
DISPUTE RESOLUTION
9.1 Any dispute arising under this Agreement shall be referred to mediation in the first instance. If mediation fails within 30 days of a written request for mediation, either party may pursue their legal remedies.
9.2 This Agreement is governed by the laws of [Governing Law] and the parties submit to the exclusive jurisdiction of the courts of [Governing Law].
GENERAL
10.1 This Agreement constitutes the entire agreement between the Founders in relation to their relationship with each other and the Company and supersedes all prior agreements.
10.2 No variation to this Agreement shall be effective unless made in writing and signed by all Founders.
10.3 The Contracts (Rights of Third Parties) Act 1999 shall not apply to this Agreement.
SIGNED by the Founders:
FOUNDER 1
Signed: ____________________________
Name: [Founder 1 Name]
Date: ____________________________
FOUNDER 2
Signed: ____________________________
Name: [Founder 2 Name]
Date: ____________________________
Founder 1
________________
Signature
Date: ________________
Founder 2
________________
Signature
Date: ________________
What Is a Co-Founder Agreement (UK)?
A Co-Founder Agreement in the United Kingdom governs the relationship between shareholders and the company and the terms on which equity is held, issued, or transferred, as regulated by the Companies Act 2006.
A Co-Founder Agreement is distinct from, but closely related to, several other key startup documents. The company's articles of association (which must be filed with Companies House under the Companies Act 2006) govern the relationship between shareholders and the company. A shareholders' agreement (which is a private contract between shareholders) provides more detailed rules about share transfers, investor protections, and governance. The Co-Founder Agreement is often a precursor to or companion document to these instruments, addressing the specific dynamics of the founders' relationship at an early stage when the company may not yet be incorporated or may be too early-stage to have a full shareholders' agreement.
For pre-incorporation ventures — where founders are working together as a team before forming a company — the Co-Founder Agreement should also address the legal status of the pre-incorporation venture (partnership or sole trader?), the allocation of liabilities incurred before incorporation, and the intention to incorporate and convert the venture into a limited company at an appropriate point.
UK venture capital and angel investors, including those investing through the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS), typically require founders to have a Co-Founder Agreement or shareholders' agreement in place before they will invest. The document demonstrates that the founders have thought carefully about governance and that the company's equity structure is clear and defensible.
Our UK Co-Founder Agreement template covers all the essential elements needed by early-stage founders, including equity splits, vesting schedules, roles and responsibilities, IP assignment, decision-making rules, and leaver provisions, drafted in accordance with English law and current startup best practice.
The legal framework governing the Co-Founder Agreement (UK) in United Kingdom draws on several key statutes and regulatory bodies. Under the Companies Act 2006, Companies House maintains the register of UK companies. Section 386 of the Companies Act 2006 sets accounting record obligations. The Competition and Markets Authority (CMA) enforces the Consumer Rights Act 2015. The Financial Conduct Authority (FCA) regulates financial services under the Financial Services and Markets Act 2000. The High Court of Justice has jurisdiction under the Senior Courts Act 1981. Parties executing a Co-Founder Agreement (UK) in United Kingdom should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies Act 2006 sets the foundational requirements.
When Do You Need a Co-Founder Agreement (UK)?
A Co-Founder Agreement should be put in place as early as possible — ideally before the founders begin working together in earnest and certainly before the company is incorporated or any significant resources (time, money, or IP) are committed to the venture.
The most common trigger for putting a Co-Founder Agreement in place is when two or more people decide to start a business together. Even if the founders are close friends or family members, a written agreement is essential. The statistics are stark: the majority of startup failures are caused not by market failure or funding problems, but by co-founder disputes. A written agreement that addresses the key issues from the outset dramatically reduces the risk of a destructive dispute later.
A Co-Founder Agreement is also needed when an existing startup adds a new co-founder — for example, when a technical co-founder joins a business that has been started by a commercial founder. The new co-founder's equity stake, vesting schedule, and role should be documented before they begin contributing.
When founders are seeking investment — whether from angel investors, venture capital funds, accelerators, or through crowdfunding platforms — investors will typically conduct due diligence on the company's corporate structure and governance. The absence of a Co-Founder Agreement or shareholders' agreement is a common due diligence finding that can slow down or derail a fundraising round.
Finally, a Co-Founder Agreement should be revisited and updated whenever there is a significant change in the founders' circumstances — for example, when a founder's role changes substantially, when a new investor joins, when a founder wishes to reduce their involvement in the business, or when the company reaches a milestone that triggers a change in equity or decision-making rights.
Parties in United Kingdom should prepare a Co-Founder Agreement (UK) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under the Companies Act 2006, Companies House maintains the register of UK companies. Section 386 of the Companies Act 2006 sets accounting record obligations. The Competition and Markets Authority (CMA) enforces the Consumer Rights Act 2015. The Financial Conduct Authority (FCA) regulates financial services under the Financial Services and Markets Act 2000. The High Court of Justice has jurisdiction under the Senior Courts Act 1981. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Co-Founder Agreement (UK)
A thorough UK Co-Founder Agreement should include the following key elements.
Party details: The full legal names and contact details of each co-founder, along with the name and registration details of the company (or proposed company) to which the agreement relates.
Equity split: The percentage of the company's shares allocated to each co-founder. The agreement should specify whether this split is fixed or may change in certain circumstances (for example, if performance milestones are not met).
Vesting schedule: The timetable over which each co-founder earns their equity. A standard UK startup vesting schedule is four years with a one-year cliff. The agreement should specify the vesting mechanism (contractual transfer obligation, share options, or growth shares), the price at which unvested shares will be transferred upon departure, and whether vesting accelerates on certain events (such as a sale of the company).
Roles and responsibilities: A clear description of each co-founder's role within the business, their area of responsibility, their time commitment, and any compensation (salary or founder drawings) they will receive.
Decision-making: The rules governing how decisions are made, including which decisions require unanimous agreement of all co-founders, which can be delegated to individual founders, and how deadlocks will be resolved.
Intellectual property assignment: A clear assignment of all relevant IP created by each founder (before and after the date of the agreement) to the company, including copyright, patents, trade secrets, and know-how.
Confidentiality and non-compete: Obligations on each co-founder to keep the company's confidential information confidential and not to engage in competing activities during and after their involvement with the company.
Leaver provisions: The treatment of each co-founder's shares upon departure, including good leaver and bad leaver definitions and the price at which shares will be transferred back.
Amendment: The procedure for amending the agreement, which should require the written consent of all co-founders.
Additional compliance elements for a Co-Founder Agreement (UK) used in United Kingdom include: Under the Companies Act 2006, Companies House maintains the register of UK companies. Section 386 of the Companies Act 2006 sets accounting record obligations. The Competition and Markets Authority (CMA) enforces the Consumer Rights Act 2015. The Financial Conduct Authority (FCA) regulates financial services under the Financial Services and Markets Act 2000. The High Court of Justice has jurisdiction under the Senior Courts Act 1981. Forms-legal.com provides this template as a starting point for United Kingdom-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Co-Founder Agreement (UK) (United Kingdom) [Legal document template]. Forms Legal. https://forms-legal.com/uk/business/partnerships/co-founder-agreement-uk
"Co-Founder Agreement (UK) (United Kingdom)." Forms Legal, 2026, https://forms-legal.com/uk/business/partnerships/co-founder-agreement-uk.
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title = {Co-Founder Agreement (UK) (United Kingdom)},
year = {2026},
howpublished = {\url{https://forms-legal.com/uk/business/partnerships/co-founder-agreement-uk}},
note = {Free legal document template. Based on Companies Act 2006}
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Frequently Asked Questions
A written Co-Founder Agreement is one of the most important documents any UK startup can put in place. Without it, disputes about equity, roles, decision-making authority, and what happens when a founder leaves can quickly become destructive and expensive. Under English law, a company is a separate legal entity from its founders, but the relationship between co-founders is a matter of contract. Without a written agreement, the courts would apply general principles of company law (Companies Act 2006) and partnership law (Partnership Act 1890) to resolve disputes, which may produce outcomes that no founder actually wanted. A well-drafted Co-Founder Agreement sets out the equity split, any vesting schedule, each founder's role and responsibilities, the decision-making process, what happens if a founder wishes to leave or transfer shares, how intellectual property created before and after incorporation will be owned by the company, and the circumstances in which the agreement can be amended. Investors — particularly venture capital and angel investors — will typically require a Co-Founder Agreement to be in place before committing funds, and its absence is often seen as a red flag indicating poor governance.
Equity vesting is a mechanism by which co-founders earn their shares in the company over time, rather than receiving all their shares outright at the outset. A typical vesting schedule for UK startups provides for shares to vest over four years, with a one-year cliff (meaning no shares vest until the founder has completed twelve months of service, at which point 25% vest immediately) and monthly vesting thereafter. If a founder leaves before their shares are fully vested, they forfeit the unvested portion. Vesting protects the remaining founders and the company from a scenario in which a co-founder leaves early but retains a significant equity stake without having contributed the work to justify it. Under English company law, share vesting in private companies is typically implemented through a combination of the company's articles of association, a shareholders' agreement, and individual founder service agreements. The unvested shares may be held by the founder subject to a contractual obligation to transfer them back at a nominal price upon departure, or may be structured as growth shares or options that only become exercisable upon vesting. Most early-stage investors in the UK expect to see some form of founder vesting in place.
Intellectual property (IP) ownership is one of the most critical issues for any technology or creative startup. Under the Copyright, Designs and Patents Act 1988, the default rule is that IP created by an employee in the course of their employment belongs to the employer. However, IP created before a company is incorporated, or by a founder who is not a formal employee of the company, may belong to the individual rather than the company. A Co-Founder Agreement should include clear provisions requiring each founder to assign to the company all IP that they have created (or will create) that is relevant to the business — whether created before or after the company's incorporation. This assignment should be in writing and should be sufficiently broad to cover patents, trademarks, copyright works, designs, trade secrets, and know-how. Failure to address IP ownership at the outset can have serious consequences: if a founder later leaves the company, they may claim ownership of core technology or content, which can derail fundraising, licensing deals, or an eventual exit.
The Co-Founder Agreement (or accompanying shareholders' agreement) should set out clearly which decisions can be taken by individual founders acting alone, which require the agreement of all founders, and which require a formal board or shareholder resolution. Typically, day-to-day operational decisions within a founder's area of responsibility can be made unilaterally. More significant decisions — such as taking on new investors, issuing new shares, taking on material debt, making key hires, entering into material contracts, or changing the company's business direction — should require the unanimous or majority agreement of all co-founders. Under the Companies Act 2006, certain decisions must be taken by way of shareholder resolution (for example, amending the articles of association requires a special resolution passed by 75% of voting shares). The Co-Founder Agreement should complement the company's articles of association, not conflict with them. It is good practice to specify reserved matters — a list of decisions that require the agreement of all founders regardless of their respective shareholdings — to protect minority co-founders from being overruled on fundamental matters.
The treatment of a departing co-founder's shares is one of the most important — and most contested — provisions in any Co-Founder Agreement. Under English law, unless the company's articles of association or a shareholders' agreement provides otherwise, a shareholder is entitled to retain their shares indefinitely, even after leaving the business. This creates the risk of a 'leaver problem', where a founder who has contributed little retains a significant equity stake that dilutes active founders and makes the company unattractive to investors. Most Co-Founder Agreements and shareholders' agreements address this by classifying leavers as either 'good leavers' (those who leave for reasons beyond their control, such as serious illness, or who leave with the board's consent) or 'bad leavers' (those who resign without cause, are dismissed for cause, or leave in breach of their obligations). Good leavers typically retain their vested shares at market value; bad leavers may be required to transfer their shares (or unvested shares) back to the company or remaining founders at nominal value. These provisions must be carefully structured to comply with applicable employment law and to avoid being challenged as a penalty.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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