For many startups, the most valuable assets are intangible: software, product designs, the brand, content and know-how. Investors are buying into a company, so they expect that company to own those assets. When intellectual property sits with a founder, a former co-founder or a freelancer instead, it becomes a due diligence red flag.
Why founder-held IP is a problem
Work done before incorporation, or by people who were never employees, does not automatically belong to the company. Under Indian copyright law, an assignment must be in writing to be effective. If a founder wrote the first version of the code, designed the logo or registered the domain in their own name, the company may not legally own it until it is assigned.
This creates risk for investors. A departing co-founder could claim ownership, a contractor could reuse work for a competitor, or an acquirer could discover that the core product is not fully owned by the company it is buying.
Assignment agreements
The fix is a written IP assignment from each founder to the company covering everything created for the business, including work done before incorporation. Domain names, social media handles, app store accounts and design files should also be held in the company's name, not in personal accounts.
Employees and contractors
Employment agreements should state that work created in the course of employment belongs to the company and should include confidentiality obligations. Agreements with freelancers, agencies and consultants need an explicit assignment clause, because the default position for contractors is different from that for employees.
- Sign founder IP assignment deeds now, including pre-incorporation work.
- Add IP and confidentiality clauses to every employment and contractor agreement.
- Move domains, repositories and accounts into company-controlled ownership.
- Keep signed copies organised for the data room.
This essay is general information, not legal or tax advice. Rules and fees change, so confirm the current requirements with a chartered accountant, company secretary or lawyer before acting.
