Quiz 1: Mid-Course — Founders' Agreements and Startup Legal Setup

Question 1 of 5

Which entity structure is most appropriate for a startup intending to raise venture capital in India?

ALimited Liability Partnership BPrivate Limited Company CRegistered Partnership Firm DOne Person Company

Question 2 of 5

Two co-founders agree to a 50:50 equity split. What is the primary structural risk of this arrangement?

AIt is prohibited under the Companies Act BIt creates a governance deadlock whenever there is a meaningful disagreement — neither founder can break the tie CIt prevents the company from raising venture capital DIt triggers mandatory ESOP allocation for other employees

Question 3 of 5

A founders' agreement typically specifies what happens if a founder departs before completing the full vesting period. Unvested shares are usually:

ARetained by the departing founder in full BRepurchased by the company or remaining founders at face value (or original issue price), effectively clawing back the unvested equity CCancelled and removed from the company's cap table DDistributed to remaining employees via the ESOP pool

Question 4 of 5

A startup's founders agreed verbally to a 4-year vesting schedule but did not include it in any written agreement. Six months later, one co-founder wants to leave. What is the legal position of the remaining co-founders?

AThe verbal vesting agreement is binding and can be enforced BWithout a written agreement, the departing co-founder likely owns their full equity stake with no vesting restrictions; enforcing a verbal vesting arrangement is very difficult CThe company's articles of association will automatically impose vesting DThe departing co-founder is entitled to only 50% of their equity regardless of the verbal agreement

Question 5 of 5

Under the standard 4-year vesting schedule with a 1-year cliff, if a founder departs 8 months after incorporation:

A25% of their equity has vested B50% of their equity has vested CNone of their equity has vested — the 1-year cliff has not been reached DAll of their equity vests immediately upon departure

Quiz 1 — Mid-Course