When Co-founder quits, what happens to the vested equity?


3

I'm a co-founder of a startup, and I've been working on it for almost 3 years. The vesting term is 1-year cliff and 1/48 per month. So now I have vested 15%, and 5% not yet vested.

I need to quit the team due to personal reasons. What should happen to my vested shares? I'd like to keep them, but my co-founders want to re-purchase at $0.01 per share ($1600 value in total). Can I refuse the re-purchase option and keep all my equities?

Equity Vesting

asked Feb 27 '12 at 01:53
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Samie
18 points
  • speaking to a lawyer might get you better answers, if you are in US talk to Scott Edward Walker. Email him, and he will give you an opinion from the legal side of things. Won't charge you either. – Bhargav Patel 8 years ago

4 Answers


3

Ideally this would have been spelled out in writing as part of your original documents. Often startups will have buy-back agreements or other provisions to address this very issue.

If you have no prior agreements, and you are in fact fully vested, then the shares are yours. For them to buy them from you they would have to make an offer that is acceptable to you. If you want to keep them that is your right.

answered Feb 27 '12 at 06:17
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Jonny Boats
4,848 points

2

Of course you can keep them - that is what "vesting" means.

I would respond with the following if I were in your position:

  1. Ask the co-founders if I could buy their shares for $.01 each. If they don't agree then ask them why it is fair that yours be sold for that much.
  2. Make a reasonable counter offer - one that would make you happy.

They could dilute your shares when you are gone - so figure out your response to that.

You will likely get nothing out of it.

It is probably good you are getting out given that

  1. your shares are worth $1600 after 3 years
  2. your co-founders treat you like that
answered Feb 27 '12 at 10:27
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Tim J
8,346 points

2

If these are options, then you would need to exercise the options.

If this is actual stock, then you own it and are under no obligation to sell it or forfeit it (barring any odd restrictions or requirements in your employment agreement).

answered Feb 27 '12 at 11:07
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Brian Karas
3,407 points

1

Is the re-purchase of shares an obligation under the grant agreement or any other shareholders agreement that you entered into with your co-founders. Please check that. Also, is the price offered for your vested shares the current market value? You should not be willing to accept less than the market value for your shares, unless you have specifically agreed otherwise or the price of your shares is tied to your exit from the company.

answered Feb 27 '12 at 16:25
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Ms. Vidyut
46 points
  • "market value" is what someone will pay. And I bet the co-founders are the only buyers - so that IS market value, by definition. But unless there is a requirement/contract like you say, he does no have to sell. – Tim J 8 years ago

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Equity Vesting