A cofounder departure is one of the most stressful events in a startup's early life. Beyond the operational disruption, there's an immediate equity question: what happens to their shares? Without proper planning, a departed cofounder can retain a large ownership stake while contributing nothing — a problem that complicates fundraising and demoralizes the remaining team.
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If the departing cofounder has a vesting schedule, only their vested shares belong to them at departure. Unvested shares typically return to the company (or are cancelled) — which is the whole point of vesting. A cofounder who leaves before the one-year cliff with no vesting agreement owns whatever percentage was written into the shareholders' agreement on day one: often 25-50% of the company. This is why establishing vesting at incorporation, not later, is essential.
Most investor-backed companies have good leaver / bad leaver provisions. A good leaver (someone who resigns voluntarily with reasonable notice or is made redundant) typically keeps their vested shares. A bad leaver (dismissed for cause or a competitor violation) may forfeit all or part of their vested shares. These distinctions need to be in the cofounder agreement before anyone leaves — not drafted in reaction to a departure.
| Good leaver | Bad leaver | |
|---|---|---|
| Typical definition | Resigns voluntarily with reasonable notice, or is made redundant | Dismissed for cause, or in violation of a competitor clause |
| Vested shares | Typically kept | May be forfeited in whole or in part |
| Unvested shares | Returned to the company or cancelled | Returned to the company or cancelled |
Definitions vary by agreement — these are the common patterns in investor-backed companies.
Even if the departing cofounder keeps their vested shares, the company or other founders often want the right to buy them back rather than leaving an inactive shareholder on the cap table permanently. Buyback clauses typically allow the company to purchase vested shares at fair market value within a defined window. A departed cofounder holding permanent equity with no obligations creates governance issues and makes future investors nervous.
An inactive shareholder is a fundraising problem
Even vested shares can be repurchased if a buyback clause exists — typically at fair market value within a defined window. Without one, a departed cofounder sits on your cap table permanently, with no obligations and full upside.
Once shares are cancelled or bought back, the cap table needs to reflect the new reality: all remaining shareholders' percentages shift upward. Equafy handles these adjustments through its share issuance and revert features — each action is logged in the audit trail, so the cap table always reflects the current ground truth with a clear history of what changed and when.
A departure is a cap table event, not a rewrite
When shares are cancelled or bought back, every remaining shareholder's percentage shifts upward. Equafy handles the adjustment through share issuance and revert, and logs each action in the audit trail.
No. Without a vesting schedule and a buyback provision, a cofounder keeps whatever equity is documented in the shareholder agreement, regardless of whether they continue contributing.
Reverse vesting means shares are issued upfront but the company has the right to buy them back on a decreasing schedule. After the vesting period, the buyback right expires and the founder fully owns the shares — it achieves the same result as standard vesting but in the opposite legal direction.
Unvested shares are typically cancelled or returned to the company's reserved pool, depending on the shareholder agreement. This reduces total outstanding shares or increases the pool available for future grants.
In a Slicing Pie model, a good leaver keeps their accumulated slices while a bad leaver forfeits them. Because equity was already proportional to contribution, there's no need to negotiate a valuation at departure.
Equafy tracks vesting, manages contributor status, and keeps a full audit log — so a cofounder departure doesn't become a cap table crisis.
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