Founder vesting and cliff: what happens when a co-founder leaves?

Two founders form a company and split the shares equally. One builds the product; the other handles sales. After eight months, the second founder decides to take another job but keeps half the company.

The remaining founder carries the product, customers, costs and responsibility. An investor reviewing the cap table sees someone who no longer contributes but still owns 50%.

Founder vesting links the intended equity package to agreed time or contribution. It can make an early departure manageable, provided the company has a mechanism that actually works. The schedule’s legal effect depends on the governing law, company form and documents used to implement it.

What you will learn

In brief

• A vesting schedule determines how much of the intended package a founder has earned under the agreed rules.
• Reverse vesting can start with shares already held, subject to an agreed mechanism for the unvested portion.
• A cliff delays the first vesting milestone; the contract must define its effect.
• The arrangement needs a trigger, calculation, buyer, price, deadline and legally valid execution process.
• Leaver status and acceleration are separate decisions that need to fit the schedule.

How does founder vesting work?

Vesting answers a practical question: how much of a founder’s intended package should they retain if their contribution ends earlier than expected?

US startup materials often describe shares being earned over time. In a Polish company, the founder may hold the full package from the outset while the unvested portion is subject to an agreed sale, repurchase or redemption mechanism. This is commonly described as reverse vesting. The chosen mechanism still has to comply with the company’s legal form and documents.

The intended economic result can be similar: a founder completing the agreed period keeps the full package, while an early leaver retains the portion defined by the rules. The rest can become available to other founders, a replacement or the company through a legally permitted arrangement. Do not assume the company can simply buy back any shares on demand.

What is a cliff?

A cliff is the initial period before the first portion is treated as vested. In a common four-year schedule with a one-year cliff, 25% of the covered package vests after twelve months, with further vesting monthly or quarterly.

Y Combinator describes the four-year, one-year-cliff model as a safeguard against an unsuccessful founder relationship. Cooley GO’s Founder Basics explains that the cliff and credit for earlier work can be adjusted. Both discuss US startup practice; they are not sources of Polish transfer formalities.

If two founders have spent a year building a product and attracting customers before incorporation, starting a full new cliff on registration may ignore their actual contribution. Poland’s National Court Register, or KRS, records the company; it does not erase the work done before registration.

Conversely, four months of occasional conversations about an idea need not count as four months of full contribution. Agree what is being credited and why.

Four years and a one-year cliff are a recognisable starting point. They are not a statutory schedule for every Polish startup.

Choose the schedule after discussing the contribution

A team working evenings on an idea has different expectations from founders who have built an MVP over eighteen months. A new full-time sales founder may need another arrangement again.

Before choosing the numbers, establish:

• When each founder began meaningful work and whether it was full-time.
• Contributions already made to product, sales, funding and IP.
• Whether vesting depends on time, milestones or both.
• How illness, removal from a role, conflict or a sale will be treated.
• Who can acquire the unvested portion and on what terms.

The schedule should reflect the intended relationship. It cannot establish that relationship by itself.

A hypothetical case: leaving after eight months

This is an illustrative case, not a client history. Three founders each receive one-third of the shares. They agree on four-year vesting and a one-year cliff, but the signed agreement only says: “The founders’ shares are subject to vesting over 48 months.”

After eight months, one founder leaves. The others say the cliff means that person should keep no shares. The departing founder points out that the shares have already been issued and that the agreement does not say to whom, at what price or by what date they must be sold.

The business expectation may be clear to the remaining team. The execution mechanism is not.

Put vesting into the right Polish documents

Polish law has no single statutory founder-vesting template. A schedule needs enforceable obligations suited to the company’s form.

In a spółka z ograniczoną odpowiedzialnością (sp. z o.o.), a Polish limited liability company, share transfers generally require a written agreement with notarised signatures. Specific electronic-template procedures can provide an exception. In a prosta spółka akcyjna (PSA), a simple joint-stock company, transfers require documentary form on pain of invalidity. These are different formal requirements, set by the Kodeks spółek handlowych, the Polish Commercial Companies Code.

Also check transfer restrictions, corporate consents, redemption rules and the articles of association. A clause that depends on fresh consent from a founder already in conflict may offer little practical protection.

Read the founders agreement alongside the articles, cap table and relevant corporate documents. The mechanism needs answers to who, what, when, at what price and in which form. Its economics and tax consequences should be assessed for the actual arrangement; a US form is not a complete Polish implementation.

Vesting and leaver status answer different questions

Vesting determines the portion earned under the schedule. Good leaver and bad leaver rules determine how the reason for departure affects the settlement, including price and the shares covered.

A founder leaving because of serious illness is in a different position from someone abandoning the project, taking a customer or breaching a non-compete. Treating them identically may create a simple formula with a difficult business result.

A bad leaver definition should not mean anyone whose departure the remaining founders dislike. Use identifiable events, a reasonable procedure and an opportunity for the person to explain their position. Otherwise the clause can become pressure to vote with the majority rather than protection against serious misconduct.

Check how the leaver rules interact with vesting. The label does not itself transfer shares or establish a price.

What happens when the company is sold?

Acceleration brings forward vesting on specified events. A single-trigger arrangement might accelerate it on the sale. A double-trigger arrangement might require both a sale and the founder’s removal without cause within a defined period afterwards.

Cooley GO’s explanation of single-trigger and double-trigger acceleration describes why buyers and investors may resist full acceleration on a sale alone: they often need key people to remain after closing. If the original retention mechanism ends immediately, a buyer may seek another package or reflect its cost in the price.

Set the events, extent and timing in your own documents. Consider whether the arrangement continues after the transaction. Assess the clause for a future investor or buyer as well as today’s founder relationship.

Agree the rules before anyone plans to leave

Start by recording each founder’s past contribution, including time, IP, money, relationships and customers. Agree the expected future commitment, distinguish the already-earned portion and choose the remaining schedule or milestones.

Then define leaver events, price and settlement steps, check the articles and legal formalities, and test several scenarios. Include one where you are the founder leaving. A clause that seems fair only when applied to someone else needs another discussion.

Vesting will not force a person to work or rebuild lost trust. It can preserve room in the cap table for investment, a replacement or an employee pool after a departure. The arrangement should be reviewed alongside the term sheet for the next round and ownership of the product IP.

If your founders agreement contains one general sentence about vesting, test the actual share settlement before relying on it. Our startup legal services cover founder arrangements, vesting and Polish corporate documents. For continuing work as the business develops, see ongoing legal support or contact us about the arrangement.

Sources and further reading

• Kodeks spółek handlowych, Polish Commercial Companies Code, including Article 180 and the PSA transfer rules. Official text in Polish.
• How to Split Equity Among Co-Founders, Y Combinator, US startup practice.
• Founder’s Stock, Vesting and Founder Departures, Cooley GO, US practice.
• Pulling the Trigger(s): What are Single-Trigger and Double-Trigger Acceleration and How Do They Work?, Cooley GO.