What happens to a founder's shares when they leave the company?
Co-foundersVestingEquityGovernance
A departing founder keeps every share that has vested and keeps voting it. The company has the right, not the obligation, to repurchase the shares that have not vested, at the price the founder paid, which is usually par value, and it has to exercise that right within the period the restricted stock agreement sets, commonly 90 days after the departure. If the board does nothing in that window, the unvested shares vest by default and the founder keeps them. So a founder leaving is a board action, with a deadline, and the first thing to do is read the stock agreement for the window.
Why the schedule exists
Founding teams change more often than founders expect, and vesting is what keeps the departure from being a disaster for the people who stay. Without it a co-founder who leaves in month eight keeps a founder-sized stake while the others build the company for them, and every investor who looks at the cap table sees a large block held by someone who no longer works there. A founder who stays wants vesting on their co-founders' shares, and the fair price of that is vesting on their own.
Cause, no cause, and acceleration
Most founder stock agreements apply the same buyback whether the founder resigned, was let go, or was pushed out, because the alternative is defining cause, and the definitions cover theft, fraud and felonies rather than the more common problem of a founder who is not working out. A founder who insists on acceleration if they are terminated without cause is asking for something investors will later unwind, and the founders who agree to it can find they cannot remove an ineffective co-founder without vesting them in full. Acceleration on a sale of the company is a different matter and customary in double trigger form.
The paperwork of a departure
A written resignation from every role: officer, director, employee, and any committee. A board consent exercising the repurchase, with the number of unvested shares, the price and the date, and a payment to the founder for that price. An updated cap table and stock ledger. A reminder that the invention assignment and confidentiality obligations survive, and a return of company property and access. If the founder holds options rather than stock, the post-termination exercise window in the plan, usually 90 days, starts on the departure date. If the founder was the responsible party on the company's EIN, Form 8822-B tells the IRS who is now. Get all of it in writing while the relationship is still civil, because the value of doing it later, in a dispute, is much lower.
A founder whose shares were never put on a vesting schedule leaves with all of them. Whether that can be changed after the fact is a negotiation, not a right, which is why the schedule is agreed at formation.
Related questions
Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.