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4 Steps to Handling a CEO Co-Founder Who Seeks to Take Back Unvested Shares

On Quora, the question was asked, "My CEO cofounder wants to fire me in order to get back my unvested shares, what should I do?" If this is your situation, your issue not uncommon. Founders frequently flounder in human and professional relations as the company grows, capital is raised, more employees are brought onboard, and new needs emerge.

Here are some quick suggestions based on the brief narrative:

  1. Check your stock option or grant agreement. Look specifically for acceleration of vesting upon a change of control or significant investment in the firm. Look for any dates or look-back periods. It’s common to put in a clause that states that if a significant capital event occurs within six months of an exit or action, that the options or shares still vest. Have an equity transaction attorney review these agreements.

  2. Check your operating agreement for your ‘buy-sell’ agreement. Look for information on how any of the founders or equity holders exit the company outside of a 3rd party capital event. There may be information there to help you. The same aforementioned attorney should be able to help you with this one.

  3. Check your executive employment agreement. This should contain terms of termination for cause, etc., and make sure that these are all covered in your research; a labor law attorney is different than a transaction attorney, so make sure you have a labor law specialist review your contract. If you don’t have a contract, your labor law attorney can guide you on local laws that apply.

  4. Check your facts and assess your situation from the CEOs perspective. It is possible that your company needs a higher capacity CTO, and as a shareholder, you may want to support this action, if it will help you ultimately create more value. Some great start-up C-level talent is unable to move to the next level. Don’t sabotage your great start if this is you. Support the CEO and figure out how to bring in great talent, and keep your shares as they may become more valuable.

With more information, I am sure there are additional items to check, however with the limited description, this should give you a clear direction on next steps.

If you have interest in this topic, read more about this on Quora.


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