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founders agreement review checklist uk

Founders Agreement Review Checklist: What to Check Before You Sign

A founders agreement review checklist for UK businesses is one of the most practical tools you can use before locking in your co-founder relationship. Most founders sign too early, too informally, or without checking whether the document actually covers what happens when things go wrong. This guide walks you through what a solid founders agreement should contain under UK law, what red flags to look for, and where the document is likely to fall short. We cover equity splits, vesting schedules, decision-making rights, IP assignment, exit provisions, and what happens if a founder leaves. These are not theoretical concerns — they are the clauses that determine whether your business survives a falling-out. If your agreement is missing any of them, you need to know before you sign, not after. Atornee helps UK founders review these documents quickly, flag gaps, and understand what they are actually agreeing to.

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Why this matters

Most co-founder disputes do not start with a disagreement — they start with an agreement that was never clear in the first place. Founders often use a template, fill in the equity split, and assume the rest will sort itself out. It does not. When a founder stops contributing, wants to leave, or disagrees on direction, a vague agreement leaves everyone exposed. UK company law does not fill those gaps automatically. Without vesting, a departed founder can keep their shares. Without a clear decision-making clause, deadlock is unresolvable. Without IP assignment, the company may not even own what it is building. This page exists to help you catch those problems before they become expensive.

The Atornee approach

Atornee is not a solicitor and does not replace one for complex disputes. What it does is give UK founders a fast, structured way to review a founders agreement before they sign or before they escalate. You upload your document, Atornee identifies missing clauses, flags ambiguous language, and explains what each section actually means in plain English. That means you arrive at any solicitor conversation already knowing what questions to ask — or you realise the document is solid and sign with confidence. It is the step between downloading a template and paying for a full legal review.

What you get

A clause-by-clause breakdown of your founders agreement against UK best practice standards
Clear identification of missing provisions — vesting, IP assignment, deadlock resolution, and exit mechanics
Plain English explanations of what each clause means for your rights and obligations as a UK founder
Red flag alerts for terms that are one-sided, unenforceable, or likely to cause problems under English law
A prioritised list of what to fix, negotiate, or escalate to a solicitor before signing

Before you sign checklist

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1. Confirm the agreement is governed by English and Welsh law (or Scottish law if applicable) and that jurisdiction is clearly stated
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2. Check whether equity vesting is included — look for a vesting schedule with a cliff period, typically one year, and monthly vesting thereafter
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3. Verify that IP assignment is explicit — all IP created by founders in connection with the business should be assigned to the company, not retained personally
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4. Review the decision-making and voting rights clauses — confirm how deadlock between founders is resolved and what decisions require unanimous consent
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5. Check what happens when a founder leaves — look for good leaver and bad leaver provisions that determine whether departing founders keep or forfeit shares
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6. Confirm there is a non-compete and non-solicitation clause with reasonable scope and duration under UK law
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7. Upload the document to Atornee to get a structured review before you sign or before you instruct a solicitor

FAQ

Does a founders agreement need to be signed by a solicitor in the UK?

No. A founders agreement does not need to be drafted or witnessed by a solicitor to be legally binding in the UK. It is a contract between private parties and is enforceable if it meets the basic requirements of English contract law — offer, acceptance, consideration, and intention to create legal relations. That said, a poorly drafted agreement can be unenforceable or ambiguous in ways that only become apparent when you need to rely on it. Getting a review before signing is worth the time.

What are the biggest red flags in a founders agreement?

The most common red flags are: no vesting schedule (meaning a founder who leaves early keeps all their shares), no IP assignment clause (meaning the company may not own its own product), no deadlock resolution mechanism (meaning a 50/50 split can paralyse the business), and no good leaver or bad leaver provisions. Also watch for overly broad non-competes that may not be enforceable under UK law, and missing dispute resolution clauses.

Is a founders agreement the same as a shareholders agreement in the UK?

Not exactly. A founders agreement is typically signed at the very early stage, often before the company is incorporated or before shares are formally issued. It covers the working relationship, roles, equity expectations, and IP. A shareholders agreement is a more formal document signed once shares exist and the company is structured. Many early-stage founders use a founders agreement as a bridge, but it should be replaced or supplemented by a proper shareholders agreement once the company is incorporated and investment is on the table.

Can I use a free founders agreement template in the UK?

You can, but you should review it carefully before signing. Free templates vary significantly in quality. Some are US-based and reference laws that do not apply in the UK. Others are missing key clauses entirely. Using a template is a reasonable starting point, but treating it as complete without review is where founders get into trouble. Run it through a structured checklist or an AI review tool before anyone signs.

When should I escalate a founders agreement review to a solicitor?

Escalate if: the equity split is complex or involves different share classes, there is significant IP at stake, one founder is contributing assets or existing IP rather than just time, you are about to raise investment and the agreement will be scrutinised by investors, or there is already tension between founders. For a straightforward two-founder startup with equal equity and no unusual assets, a structured self-review plus AI-assisted check may be sufficient to identify gaps before you decide whether to instruct a solicitor.

What happens if we never signed a founders agreement and something goes wrong?

Without a written agreement, you fall back on whatever can be implied from your conduct, any emails or messages exchanged, and the default rules under UK company law and the Companies Act 2006. That is a difficult and expensive position to be in. Courts can sometimes imply terms, but it is unpredictable and costly. If you are in this situation and a dispute is emerging, speak to a solicitor promptly rather than trying to backfill an agreement after the relationship has broken down.

Related Atornee Guides

Cheap Contract Solicitor Alternative (UK)

Useful if you want to understand broader options for reviewing contracts without full solicitor fees.

Cheap Solicitor for NDA (UK)

Relevant if your founders agreement also needs to be paired with a confidentiality agreement between co-founders.

Atornee Use Cases

See how UK founders and early-stage teams use Atornee across different document types and workflows.

External References

GOV.UK Business and Self-employed

Official UK guidance on setting up and running a business, including company formation relevant to founders.

UK Legislation

Primary statutory reference for the Companies Act 2006 and other legislation that governs founder rights and company structure in the UK.

Trust & Verification Policy

Authored By

A

Atornee Editorial Team

UK Startup and Founders Agreement Research

Reviewed By

C

Compliance Review Desk

UK Business Legal Content QA

Last reviewed on 3/4/2026

"This content is based on analysis of common founders agreement structures used by UK early-stage companies and the clause gaps most frequently identified during document review. It reflects practical patterns observed across startup legal documentation in the UK market."

References & Sources