Piyush Soni .

Can an employee/Co-founder be terminated just before the Equity vesting period ends?

Let's say that your employee/co-founder is not performing well, So in this scenario, can his vesting period be ended?

Is there any legal way to stop this?

PS. It's a query followed by yesterday's discussion on "What should be a fair equity offered to an unpaid employee"?

Originally Posted Here

Jeet Parekh

Not possible in ideal scenario.

Piyush Soni

I had heard somewhere, not remember exactly that legally action can be taken if situation goes out of hands. Is that right?

Jeet Parekh

yes it is tiring in India. Almost impossible if split is 50-50

Piyush Soni

Yeah 50-50 scenario would be tough one! But if lets say 2% vested or may be 10, then?

Sudhir Kumar Sinha

Yes you can depend on your legel term during agreement.

Piyush Soni

Do this depends on like countries. Some places, it is easy some places it is not!

Sudhir Kumar Sinha

it doesn't depend on country. It depend on terms of Agreement.

Gaurav Agarwal

It is based on how the agreement is worded.

I remember the case of a start up in food tech space where the team which devised the concept and the first cut of the app, raised seed funding and in the excitement did not vet the agreement and blindly signed it.

There was a clause intentionally put in, which stated that post series B or C funding the stake of the original co-founders would be diluted and they can continue in the capacity of an employee only.

They lost their start up within 24 hours, had no legal recourse and were actually attending interviews...

It is always better to seek an unbiased legal view before doing such critical paperwork.

Shivam Malhotra

but this would've happened in the term sheet? This question is more about the ESOP/Co founder agreement.

btw if a team signed up such a term sheet then they dont even desreve the equity,just saying!

Gaurav Agarwal

they were a group of 3 over enthu freshers, but the learning for me was that you can take their start up away but not the spirit of entrepreneurship, today they are solving new problems and building new startups.

Shivam Malhotra

Depends on the termination clause.You can always terminate without clause (if provided in agreement), terminate with cause (provided in agreement) or the person leaves on their own.

If he/she doesnt satisfy the vesting period clauses then shares could be bought back.

Vineet Nandan Gupta

Yes, the services can be terminated. Things can be mess between Legality and Technicality.

At present haven’t heard about stopping this in an amicable way.

Siddharth Gangal

No sane person would do this unless there were severe performance issues.

Do you want to grow or spend time finding an alternative to the person… it's hard

Piyush Soni

Yes correct! But sometimes situation occurs. One of our teammates, started taken things for granted and he continued to do this for at least 3-4 months!

Rahul Rajvanshi

Folks can give you multiple advices but once someone is on your cap table is almost impossible to remove them.

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