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Thanks! What about if founders/board decide to "take away" your already-vested equity after you leave the company, by issuing new shares to all shareholders exc
by startup_new_guy 4y ago
Thanks! What about if founders/board decide to "take away" your already-vested equity after you leave the company, by issuing new shares to all shareholders except for you? Is there typically anything preventing this aside from goodwill/reputational concerns?
- sn0w_crash 4y agoThis is extremely rare and enough case law exists that you would be able to sue them for doing so. It looks extremely nefarious in court and is a bigger headache than it’s worth. I’ve never heard of this happening successfully. What you’re probably asking is “how can they screw me?” And the answer is if they terminate you before youre vested. That’s why as an early employee you want to negotiate some type of accelerated vesting schedule.
- throwaway-blaze 4y agoThis is somewhat common and can be done legally. Search for "cram down" or "recapitalizing". It is usually done when a company is about to go bankrupt and a new investor comes in, but wants to clean up that cap table of existing shareholders (who would lose everything if the company went to $0 anyway). Technically the existing shareholders are asked to agree to the changes as a condition of the new investor(s) putting money in. Sometimes they are given the right to put in money to keep a real position in the newly-recapitalized company.
- startup_new_guy 4y agoVery interesting and good to know! I'm relieved that this is something that's done in the event of near-bankrupcy and not something that founders use to shadily "take back" equity from departed early employees.
- sn0w_crash 4y agoBut at that point the company is dead anyway, so it’s not about screwing OP out of their equity but about completely rebooting the company.