What is Consequences of what to do when a co-founder leaves?
Nexa Consultancy | Startup & Finance Glossary
A co-founder's departure can be disruptive. The first step is to refer to the Shareholders' Agreement (SHA). A well-drafted SHA will have clauses on vesting, which determine how many shares the departing founder gets to keep, and clauses on share buyback, which may give the company the right to repurchase those shares.
Startup Example: A co-founder with 30% equity leaves after 1.5 years of a 4-year vesting schedule with a 1-year cliff. They are vested in their cliff shares (25% of 30%) plus 6 months of monthly vesting. The company has the right to buy back the unvested shares for a nominal price.
Having a strong SHA is critical, a key part of our Corporate Law services.