The default that breaks startups
Founders incorporate, issue equal shares, and never write a vesting agreement. Twelve months in, one co-founder leaves with half the cap table.
A reasonable default
- 4-year vest with a 1-year cliff.
- Double-trigger acceleration on change of control.
- Good leaver / bad leaver treatment baked in.
Drafting tips
Vesting in India is implemented via a Shareholders' Agreement + a Restricted Stock Purchase Agreement (RSPA). Keep the latter dated before issuance to avoid Section 56(2) tax shocks.
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Written by
Karthik Subramanian
Corporate Lawyer
Karthik writes for IVEC Insights on practical legal, tax and compliance matters for founders building businesses in India.
