Founders Agreement Template for Saudi Arabia: Why the US Versions Don't Fit

A founders agreement in Saudi Arabia needs the same core terms as anywhere — equity split, vesting, IP assignment, departure mechanics — but the document has to sit on top of Saudi corporate law, not US corporate law. Most templates you'll find by searching "founders agreement template" are written for a Delaware C-corp: they reference an 83(b) election that doesn't exist here, assume a single class of common stock, and say nothing about the entity type the 2022 Companies Law actually built for startups. Get the skeleton from any decent template. Get the mechanics from what's actually true about incorporating and vesting equity in Saudi Arabia.

Search results for this keyword split into two camps. One is generic contract generators — PandaDoc, Signaturely, Business-in-a-Box — producing a US-shaped document with a find-and-replace jurisdiction field. The other is Saudi-specific legal-tech templates that get the jurisdiction right but hand you a static file with no connection to what happens next: the actual share issuance, the vesting tracker, the board resolution approving it. Neither gap is fatal on its own. Together, they're why founders sign something, then spend a fundraising round finding out it doesn't match how their company is actually structured.

What the 2022 Companies Law changed, and why it matters for this document

Saudi Arabia's Companies Law (Royal Decree No. M/132) took effect in early 2023 and introduced an entity type built specifically for startups: the simplified joint-stock company (SJSC). Before it existed, VC-backed founders defaulted to a standard LLC that wasn't designed for multiple share classes or fast follow-on rounds. The SJSC fixes that directly:

• No minimum capital requirement, and shares can be issued in-kind.
• Multiple share classes are explicitly permitted — the mechanism a priced round or an option pool actually needs.
• The company can be managed by a single manager or a board, founder's choice.
• Shareholder decisions can be made by circulation among shareholders instead of convening a general assembly for every routine approval.

This matters for a founders agreement because the agreement is a promise about equity, and the entity has to be able to keep that promise. A founders agreement that splits equity 60/30/10 and vests it over four years is only enforceable if the underlying entity can actually issue the share classes and vesting mechanics the agreement describes. An SJSC can. A standard LLC, drafted without this in mind, may not cleanly support the same structure — which is the kind of mismatch that surfaces during due diligence, not before.

Foreign founders have a second layer to check: MISA's Entrepreneur License, which allows 100% foreign ownership of a Saudi startup without a local sponsor, provided the company is innovation-based and backed by a recognized accelerator, incubator, or VC, or holds registered IP. It's not automatic eligibility — it's a specific license with specific criteria — but for a foreign co-founder team, it's usually the difference between a founders agreement that reflects reality and one written for an ownership structure Saudi law won't actually let you hold.

The terms a founders agreement needs — and where Saudi-specific mechanics change them

The skeleton is the same everywhere: who owns what, how it vests, who owns the IP, what happens if someone leaves. What changes in Saudi Arabia is the mechanics underneath each of those terms.

Equity split. Base it on contribution — time, capital, prior IP, role — the way you would anywhere. The Saudi-specific step is naming the share class each founder's equity actually sits in once the SJSC is formed, since the agreement's percentages are only meaningful if they map onto a share class the entity can issue.

Vesting. Four years with a one-year cliff is the standard you'll see in Saudi startups, the same as most other markets — it's a market convention, not a legal requirement, so there's nothing in Saudi law forcing this schedule on you. What is worth checking locally: since 2018, Saudi securities regulations have treated employee stock option plans as "exempt offers," meaning no pre-offer or post-offer filing with the Capital Market Authority is required to run one. That's a genuine advantage over jurisdictions where an option pool triggers a securities filing — but it only applies to the ESOP itself, not to founder equity, so don't assume it exempts the whole founders agreement from anything.

IP assignment. Every founder needs to assign IP created for the company to the company, full stop — this term doesn't change by jurisdiction. What changes is enforcement mechanics: make sure the assignment clause references the entity that will actually hold the IP (the SJSC, once formed), not a placeholder "the Company" that doesn't yet legally exist at signing.

Departure and buyback. Unvested equity returns to the pool if a founder leaves — standard everywhere. The Saudi-specific detail is how the buyback of vested-but-departed equity gets priced and executed, since that's a share transfer under the Companies Law and needs to follow whatever transfer mechanics your specific entity type requires.

What doesn't apply at all: the 83(b) election. This is the most common error in US-template-adapted-for-Saudi-Arabia documents. The 83(b) election is a US IRS filing, made within 30 days of a restricted stock grant, that lets a founder pay tax on the equity's value at grant instead of at vest. Saudi Arabia has no personal income tax, so there's no equivalent filing, no 30-day window, and no reason for this clause to exist in a Saudi founders agreement at all. If a template you're using mentions it, that's a signal the rest of the document wasn't actually adapted — just relabeled.

Sign it before you need it

Execute the founders agreement before incorporating, or immediately after — not when a term sheet is on the table and every clause becomes a negotiation between co-founders instead of a formality. The single structural decision worth a lawyer's time is entity choice: SJSC versus standard LLC, and whether a MISA Entrepreneur License changes what's possible for a foreign-founder cap table. That's a one-time call, similar to the one we cover in ESOP without lawyers: what actually needs legal review — one structural decision needs a professional, and everything downstream of it should be repeatable paperwork, not a fresh legal review every time.

Once the entity and share classes are settled, the founders agreement itself — and the grant agreements, board resolutions, and vesting schedules that follow from it — shouldn't require redrafting from scratch each time. That's the same failure mode we've written about for cap table software built for Saudi Arabia and MENA: a document that's technically correct but disconnected from the actual share register isn't much better than the wrong document, because nobody catches the drift between what the paperwork says and what the cap table shows until an investor asks.

Where Govy fits, specifically

Govy's legal template pack includes a founders agreement generated for the Saudi jurisdiction alongside board and shareholder resolutions, NDAs, and SAFE agreements — the document generates in English (the product interface is available in Arabic and seven other languages including full RTL, but generated legal text is English) and flows straight into Govy's built-in e-sign. Once it's signed, the equity split and vesting terms it describes are the same terms you set up on the cap table — no re-entering numbers into a second system, no static PDF sitting disconnected from the actual share register.

What Govy doesn't do: pick your entity type, confirm MISA license eligibility, or replace the one-time legal review that entity choice deserves. There's no Nafath or Absher identity check built in, and no direct filing integration with the Ministry of Commerce or other Saudi government registries — those steps still happen through your lawyer and the relevant government channel. What Govy replaces is everything that should have been boring paperwork after that: template, signature, vesting tracker, and cap table, in one place instead of four.

See how Govy's Saudi Arabia template pack, e-sign, and cap table fit together at govy.tech.

FAQ

Do I need a founders agreement if we're not incorporated yet?

Yes, and it's easier before you incorporate than after. A founders agreement records what each person contributed and how equity splits before there's a cap table to fight over. Sign it as an interim contract between the co-founders, then have the incorporated entity's share issuance and vesting schedule mirror it exactly when you form the company.

Is a founders agreement legally required in Saudi Arabia?

No. Neither the Companies Law nor MISA requires one. It's required in practice, the same way it is everywhere: without it, equity splits, vesting, and departure terms exist only as a verbal understanding, which is unenforceable and forgotten differently by each co-founder within a year.

What is a simplified joint-stock company and do I need one?

It's an entity type the 2022 Companies Law created specifically for startups and VC-backed companies — no minimum capital, multiple share classes, and shareholder decisions by circulation instead of a convened general assembly. Most VC-backed Saudi startups use it instead of a standard LLC because it's built for the share classes a priced round or ESOP pool requires.

Does the 83(b) election apply in Saudi Arabia?

No. The 83(b) election is a US IRS filing tied to US personal income tax on equity compensation. Saudi Arabia has no personal income tax, so there's no equivalent filing and no 30-day deadline to worry about — a founders agreement template built around 83(b) language is solving a problem that doesn't exist here.

Can a foreign founder own 100% of a Saudi startup?

Yes, through MISA's Entrepreneur License, provided the startup is innovation-based and backed by a recognized accelerator, incubator, or VC, or holds registered IP. Outside that license, standard foreign-ownership rules and sector restrictions apply, so check eligibility before assuming the 100%-ownership path is automatic.