
Ask HN: Contract says my vested shares are forfeited if I quit within 24 months - walleee
Is this standard&#x2F;fair?<p>I&#x27;m joining a 2 person startup as a co-founder and this is the language in their contract:<p>Notwithstanding anything to the contrary herein, if Recipient’s employment is terminated by Recipient prior to twenty four months having elapsed since the Effective Time (such twenty four month anniversary being the “Resignation Date”) then all of the Vested Units and Unvested Units (whether held by Recipient or one or more of Recipient’s transferees) shall automatically be forfeited and cancelled without any payment with respect thereto as of the Termination Date, in each case, without any action on the part of Recipient or the Company and after the Termination Date shall not be outstanding for any purpose.
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petervandijck
Does it apply to the other co-founders as well? If not, then you're not on
equal footing.

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brudgers
I am not a lawyer [and recommend hiring your own to review the contract and
recommend a course of action]. This appears to mean that if you quit within 24
months of whatever the "effective time" is, vested shares are clawed back.

On the one hand, if it seems like a problem now, that doesn't may indicate a
questionable relationship. On the other hand, that it seems like enough of a
problem now to load it into the contract seems shortsighted by the company: if
there's a problem 14 months from the "effective time" [whatever that is], the
best thing for everyone might be for you to resign rather than stick around
another ten months [an early-stage startup eternity] to maintain your equity
while the other founders devote energy toward getting you to quit instead of
growing the company.

To me, it looks like it may indicate the use of documents more typical of a
small closely held business than a startup in the form of a Delaware C-corp.
Then again, a lot of companies are called "a startup" that are not really
designed for sustained rapid growth and organized to accept outside equity to
fuel it...e.g. people refer to restaurants and similar new local businesses as
startups.

Good luck.

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walleee
Thank you, that's helpful.

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jtfairbank
That goes one step beyond the standard cliff period for vesting. Honestly it
doesn't seem like the incentives are aligned: if you make it past a one year
cliff, your shares / options are vested and they are yours to keep / exercise.
You earned them!

As other commentars noted, in this scenario you may want to quit but choose to
stay until the 24 month mark (bad). The founders may want you to leave but
instead of firing you they'll make you miserable so you quit and this portion
of the contract goes into effect (bad).

My rec: If everything else is solid and there's a cliff period setup in
another portion of the contract, get this removed. If there isn't a cliff,
convert this to a standard 1, 1.5, or 2 year clif using the normal language
(no shares vested until the cliff, then they're yours after that).

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toomuchtodo
> If there isn't a cliff, convert this to a standard 1, 1.5, or 2 year clif
> using the normal language (no shares vested until the cliff, then they're
> yours after that).

Consequently, I'd also ask for a higher salary or more options if the cliff
gets bumped up beyond 1 year. Risk management and all that jazz.

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elmerfud
Fair/standard is more about the total compensation of the contract. Based on
the fact that you're asking leads me to think that you find this section to
not be fair as it relates to the total compensation.

Contracts are a negotiation process, line out or modify the sections you don't
like and submit it back for their approval. If they're not willing to
negotiate then they likely aren't a place you'll want to work for.

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walleee
Fair enough. Isn't this essentially just a 2 year cliff period? Do you have
any insight as to what the norm amongst startups for this condition is?

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elmerfud
I don't have enough direct experience to comment on what's normal for for
joining in a small setup as a cofounder.

It doesn't seem abnormal for the employment contract to have various clauses
that are there to ensure a minimum commitment to the venture.

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alain94040
Are you receiving a salary as well or not? In my book, a cofounder without
salary should not have a cliff.

Even if you are receiving a salary, a two-year cliff is very unusual.

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iSloth
So many parts to a contract, assuming the salary and other aspects are what
you'd consider good then to me this seems fair.

If the other parts are low and this is seen as part of the main package rather
than a longer term bonus, then it wouldn't be so far...

I doubt a co founder is going to leave within two years unless something is
seriously going wrong...

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walleee
Thanks, this helps.

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mindvirus
This is a really weird clause. - what's to stop you from just not showing up
to work? You either get fired and get your shares, or stay on payroll and get
your shares.

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finance-geek
I am not a lawyer, but _not showing up_ is not a good idea, you could then be
fired _for cause_ and lose your stock. Being fired is different from being
laid off.

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sharemywin
Do both of you have the same clause? I would get a lawyer

