It sounds like the country you are in has very strong protections for your equity, and very likely if you do nothing then you would continue to own 40%. You ha

It sounds like the country you are in has very strong protections for your equity, and very likely if you do nothing then you would continue to own 40%. You have already offered a generous offer to the cofounder to reduce your equity stake over time and without knowing their side of the story, that seems like a great deal to take. You did put in two years of work, at a reduced, or $0 salary, and as a result there should be some equity that you retain. You could simply just ignore everything and move on, and if the company sells get your 40%. You have already made an offer that he could have accepted, but chose not to for whatever reason. So why stress more about it? Agreements should be set in place beforehand as others have mentioned, specifically around vesting schedules and also control structures and so forth, but this is a good learning lesson for both of you. So if you make a generous offer and instead of accepting it that person comes back and says you should have 0%, why are you continuing to put that person's needs first?