Founders' Agreement Singapore: Companies Act 1967

A founders' agreement is a private contract between the people starting a company. In a Singapore context it usually sits alongside two other documents and should never contradict them. The first is the company constitution, the public rulebook filed with ACRA that governs share classes, director appointments and voting at meetings. The second is the shareholders' agreement (SHA), a private contract that goes deeper into how owners run the company between themselves. A founders' agreement is best understood as the founder-specific layer: the part that deals with the people who built the thing, not just the people who hold shares.

In practice the line between a founders' agreement and an SHA is thin, and many Singapore startups fold the two into a single document signed at incorporation. What matters is that the founder-specific terms exist somewhere in writing: equity split, vesting, roles, time commitment, IP assignment and exit. Where the constitution and the agreement disagree, third parties such as banks and investors rely on the constitution, so the two must be aligned from the start. A vesting clause buried in an agreement that the constitution silently overrides is a clause you cannot enforce when it counts.

A Pte Ltd is incorporated and governed by the Companies Act 1967 (Cap. 50), administered by the Accounting and Corporate Regulatory Authority through the BizFile+ portal. The Act sets the baseline: at least one director ordinarily resident in Singapore, at least one shareholder, a registered office and a company secretary appointed within six months. What the Act does not do is dictate the private bargain between founders. It does not require a founders' agreement or an SHA, and it does not supply most of the protections co-founders need. That gap is exactly what your agreement fills, and it rests on Singapore's common law of contract: offer, acceptance, consideration and an intention to create legal relations.

The single most important point for Singapore founders concerns vesting. Singapore company law contains no automatic vesting mechanism. Give a co-founder 40 percent at incorporation and watch them leave after six months, and absent a vesting clause they keep the full 40 percent. There is no statutory claw-back. Vesting must be drafted explicitly, which is why this document earns its place.

Restraint clauses sit under a separate rule. A post-exit non-compete binding a departing founder is enforceable only if it protects a legitimate interest, such as confidential information or client connections, and is reasonable in scope, duration and geography. A blanket ban on ever competing will be struck down. Electronic signing is generally valid under the Electronic Transactions Act 2010, with narrow exceptions. You can read the statute itself on the Companies Act 1967 page at Singapore Statutes Online. For the governance papers that surround it, our Singapore board resolution template under the Companies Act 1967 handles the formal decisions that put your terms into effect.

The clearest trigger is incorporating a Pte Ltd with one or more co-founders. The day you file with ACRA is the day equity becomes real, and it is far easier to agree the split while everyone is optimistic than to renegotiate it after a disagreement. A close second is the situation where founders have already started building, perhaps shipped a product, but have never documented anything between them. That informal phase is the most dangerous one, because contributions are diverging silently and nobody has agreed what they are worth.

You also need it when one founder is contributing cash and another sweat. Unequal inputs demand explicit terms on vesting and what counts as leaving, otherwise resentment fills the silence. Bringing in a fourth or fifth founder months after the others started is another flashpoint: late joiners should sit on the same vesting logic, not a quiet exception. The same goes for any founder who keeps a day job while the others go full time. A frequent edge case worth flagging is the founder who provides the original IP, a codebase or a patent, and assumes it stays personally theirs. Without a written assignment, the company may not own the very asset it was built on, which is the first thing a serious investor will check. If you also plan to hire, pair the agreement with a Singapore employment contract built for the Employment Act 1968.

• The equity split and share capital section records each founder's shareholding, the class of shares and how the cap table looks at incorporation. It cross-references the Companies Act 1967 share structure so the figures match what ACRA holds, because a private split that contradicts the constitution is the inconsistency that derails funding rounds.
• The vesting schedule is the heart of the document. The common Singapore practice is four years with a one-year cliff, meaning a founder who leaves before twelve months vests nothing and one who stays accrues monthly thereafter. Since Singapore law gives you no default, every word here is doing real work.
• The founder roles and time commitment clause sets who does what and how many hours each owes the company. It defines full-time versus part-time status, which then connects to the leaver provisions, because a founder quietly going part-time should not keep vesting as if nothing changed.
• The intellectual property assignment transfers to the company all IP created by each founder in connection with the business, including code, designs, brand and pre-incorporation work. This is the clause investors scrutinise first, and the one most often missing from handshake arrangements.
• The leaver and exit provisions distinguish a good leaver from a bad leaver, set the price and mechanism for buying back unvested or even vested shares, and cover drag-along and tag-along rights so a sale of the company is not held hostage by one holdout.
• The reserved matters and deadlock clause lists the decisions that need special approval and sets a route out of a fifty-fifty stalemate, the failure mode that kills two-founder companies most often.

Singapore is a single jurisdiction, so there is no state-by-state variation to map. The variation that matters here is structural: which vehicle you are founding and how the founder terms interact with the statutory paperwork around them. For a Pte Ltd, the constitution filed with ACRA is public and binding, and Singapore courts may prioritise it over a private agreement where the two conflict. The practical rule is to draft the founders' agreement and the constitution together, then keep them in step every time one changes. An exit mechanism that lives only in the agreement, while the constitution still grants equal rights to all shareholders, is the textbook contradiction that surfaces at the worst moment.

If you are founding through an LLP under the Limited Liability Partnerships Act 2005 rather than a Pte Ltd, the logic of a founders' agreement still applies but its home shifts to the LLP agreement, where contributions, profit sharing and partner management live. Tax treatment differs too, since an LLP is tax-transparent while a Pte Ltd is taxed at the corporate level, and that difference can shape how founders think about drawing value out. Whichever vehicle you choose, the Income Tax Act may treat vesting events as taxable, so founders dealing with substantial equity should take their own tax position into account. For the foundational governance document of the company itself, see our Singapore CLG constitution template under the Companies Act 1967, and browse the wider Singapore business and incorporation document library for the resolutions and consents that complete an incorporation.

You start by naming the founders and the company, then entering the agreed equity split and the share class each founder holds. The form then asks you to set the vesting terms, where you choose the total period and the cliff; the four-year term with a one-year cliff is offered as the Singapore default, and you can adjust it if your founding team has a different bargain in mind. From there you define each founder's role and weekly time commitment, which feeds directly into the leaver logic later in the document.

Next you set the IP assignment scope, confirming that work created before and after incorporation passes to the company, and you decide whether a non-compete applies and how tightly it is drawn, keeping it reasonable so it survives scrutiny. You then choose the leaver mechanics, the reserved matters and the deadlock route. The output is delivered as editable Word and PDF, so you can take it to a lawyer for a final read or sign it as is. Founders raising soon should align it with the constitution before filing, and our Singapore tenancy agreement for your registered office covers the address requirement the Act imposes.

The most expensive mistake is skipping vesting entirely. Founders who split equity equally on day one and assume goodwill will sort out a departure later are the ones who discover, too late, that Singapore law has no claw-back and a former co-founder is keeping a third of the company for three months of work. The fix is a written schedule with a cliff, agreed before anyone has a reason to argue about it. Almost as common is leaving IP unassigned. A founder who wrote the original code on a personal laptop and never signed it over may personally own the company's core asset, and an investor's lawyer will find that hole in the first hour of due diligence.

The third trap is a founders' agreement that quietly contradicts the constitution. Because third parties rely on the public document, a buy-back right or priority that lives only in the private agreement may not bind the company at all. Founders also overreach on non-competes, drafting bans so wide that a court refuses to enforce any of it, leaving the business with no protection rather than a narrower one that would have held. Finally, many teams treat the document as one-and-done. Roles change, founders join and leave, and an agreement frozen at incorporation slowly stops describing the company it governs. Review it whenever the cap table or the founding team shifts.