Most Bengaluru founding teams weigh two documents against each other. One is a short understanding on email, or a two page memorandum recording the equity split and nothing else. The other is a founders agreement that also fixes vesting, intellectual property, exit and forum. Karnataka's stamp law removes the usual reason for picking the shorter one, because it charges an agreement and a memorandum of an agreement under the same head. So the two page version saves you nothing on duty. It only buys you fewer answers. One founder with no equity to divide can wait. Two or more people splitting a company cannot.
Does your Bengaluru founding team actually need this, or will the articles cover you?
The test is short. Two or more people are taking equity in the same venture, and at least one is contributing something other than money. That holds whether the company is incorporated or still sitting at name reservation.
A sole founder does not need one. What that founder needs is an employment contract and an assignment letter for the first hires, which is a different instrument doing a different job.
The articles of association will not fill the gap. They govern the company and its shareholders as a body. They say nothing about who runs sales, what happens when a founder stops turning up in month seven, or whether the tooling drawings on a personal laptop in Peenya belong to the company. Bengaluru founders routinely assume the incorporation papers settled this. They did not. And if an investor has already put a shareholders agreement in front of you, the founders document still goes first.
What has to be settled before the drafting starts?
Drafting is quick. Agreeing is not. Every line below is a decision only the founders can make.
| Clause | What the founders must settle | The point to watch |
|---|---|---|
| Equity split | Each founder's percentage on signing, and how dilution is shared | The split bears no state duty; a later share transfer is charged centrally |
| Vesting and cliff | Cliff length, vesting period, and what a leaver keeps | Nothing here is registrable, so the stamp is the only formality |
| IP assignment | Code, drawings, tooling, brand, anything built before incorporation | This carries its own rate and the assignee bears it |
| Roles and reserved matters | Who signs cheques, who hires, what needs everyone to agree | Bank mandates and board minutes must match the clause |
| Exit and buyback | Notice, valuation basis, who gets first refusal on the shares | Draft it so an exit runs without reopening the agreement |
| Forum | The court, or the arbitration seat, that hears a founder dispute | Bengaluru is the sensible seat for a company registered here |
We also need a small document set before a draft opens:
- the certificate of incorporation and the CIN, or the reserved name if the company is not there yet
- PAN and address proof for every founder, matched to the name each of them will sign under
- a note of what each founder has contributed, in money, equipment, code or unpaid months
- any accelerator, customer or employee arrangement that already touches equity or intellectual property
How does the drafting and the signing actually run?
- A call with a CA or CS on our team, usually 30 to 40 minutes, to record the split, the vesting shape and anything unusual.
- A first draft written around your facts, with the intellectual property and exit clauses shaped to the business you run.
- Your review and one revision round, where most Bengaluru teams find that two of them meant different things by the same number.
- Duty computed and the instrument stamped before or at the time of signing, because stamping after signature is not a cure.
- Execution by every founder, wet ink or electronic signature, and a clean copy each plus one for the company records.
Karnataka finally notified rules on 7 August 2025 for a fully digital e-stamp whose repository copy is the original, and we stamp your instrument by the method the department is currently accepting. Kaveri 2.0, the Department of Stamps and Registration's own portal, carries the duty calculator and the sub registrar office locator we work from. No founder attends an office for this, because the agreement is not an instrument that has to be registered.
Which authority ends up holding this document?
None of them, and that catches people out. The agreement is stamped, not registered. The duty is collected, and the instrument then lives in your own records. There is no register, no file number, and no officer you can write to for a copy three years later.
So the stamp is the only thing standing between you and an unusable document. Under the Karnataka Stamp Act an instrument that is not duly stamped cannot be admitted in evidence or acted upon, and a person in charge of a public office is obliged to impound it. It can be let in later, but only on paying the shortfall plus a penalty of ten times it. Founders learn this in the worst week, with an investor's counsel already reading the page.
Forum is the second thing to get right. The High Court for a company registered here is the Karnataka High Court, principal seat at Bengaluru, and a Bengaluru jurisdiction clause says that cleanly. It hears commercial matters on appeal rather than at first instance, so a Bengaluru commercial suit starts in a commercial court at the district level. The Commercial Courts Act sets the floor at three lakh rupees, and a state can notify a higher figure, so we confirm the current position first.
What does a founders agreement cost in Bengaluru, and when does it come back?
We draft it for ₹4,999, delivered in 2 to 3 days. That fee covers the consultation, the draft, the revision round and the execution ready copy.
Stamp duty sits on top and is small. An agreement that no other article catches is charged ₹500 under Article 5(j) of the schedule, a figure raised on 3 February 2024 that plenty of Bengaluru templates still print wrongly. Two warnings go with it. An assignment of intellectual property rights carries its own rate, one rupee for every one thousand rupees of consideration with a floor of ₹200, and the assignee bears that duty. Where one instrument answers to several descriptions, the highest of those duties applies, so a draft that also assigns intellectual property for consideration is not automatically a five hundred rupee document.
The agreement does not expire and there is no renewal. It comes back at four moments: when a founder joins or leaves, when a term sheet arrives and outside counsel starts reading, when the company converts, and when the vesting schedule runs out. Each of those is an amendment, not a fresh agreement.
Which Bengaluru founding teams are signing these right now?
- A precision engineering and machine tools unit in Peenya, where two founders split the shop floor and the customer accounts, and the tooling drawings have to belong to the company
- A family trading business in Chickpet bringing the second generation in as an equal partner, doing on paper what an unwritten family understanding used to do badly
- A software services team in Whitefield that took on a third founder after year one, and now needs a separate vesting clock for the newcomer alone
- A product team in Koramangala with a term sheet on the table, whose investor asked to see the signed founders agreement before diligence even opened
The Peenya case goes wrong most often. Manufacturing founders contribute machines rather than cash, and nothing in the incorporation papers records that a lathe bought personally now belongs to the company. We put the contribution schedule inside the agreement, so the asset and the equity line up on one page.
What does LegalX India do differently on a founders agreement?
Our CA and CS team drafts to your facts instead of a template, and the whole engagement runs online. We compute the duty before execution rather than after it, name a forum that fits a company registered in this state, and keep the intellectual property clause tight enough to survive an investor's diligence.
We will also tell you what this document does not do. It does not amend your articles, it does not bind a future investor, and it does not replace employment contracts for your first hires. For structure and standard vesting practice across the country, read our complete Founders Agreement guide for India. For the drafting, the duty and the forum clause, talk to our team, and we will start with the part of the equity split you have not quite agreed on yet.