LEGAL
Equity & Ownership Deep Dive
Repurchase Rights & Departing Employees — Keeping Your Cap Table Clean
Repurchase rights allow the company to reclaim unvested or recently vested shares from team members who leave. This keeps the cap table clean and aligned with active contributors.
Why it Matters
When team members leave, they may walk away with equity — vested or unvested. Without clear agreements and repurchase rights, your cap table can become a mess, deterring investors and future hires.
Founders Checklist
Use vesting schedules to handle unearned equity
Include post-termination exercise windows in option agreements
Consider adding repurchase rights to stock grants for founders or early hires
Clarify in writing what happens to unvested and vested shares upon departure
Clean up cap table immediately when someone leaves
Founder Fails
No repurchase clause > ex-founder kept 20% despite quitting after 14 months
Didn’t update cap table > outdated ownership shown in diligence
Left option exercise window undefined > confusion + missed equity
When to ask for Help
Before signing any equity agreements with employees or advisors
When someone leaves the company, especially if equity is involved
To clean up legacy equity arrangements or ambiguous grants
During due diligence, M&A, or cap table audits
When planning equity policies for future growth
Frequently Asked Questions
Q: What happens to unvested equity when someone leaves?
A: It typically returns to the company. This is why vesting exists — to align equity with contribution over time.
Q: What about vested equity — can we take it back?
A: Only if your agreement includes repurchase rights or similar clauses. Otherwise, vested equity usually stays with the individual unless voluntarily sold.
Q: What’s a repurchase right?
A: It gives the company the right to buy back vested shares, often at fair market value, if an employee or founder leaves. These are rare, but useful for founders or key hires.
Q: What’s a standard exercise window for options?
A: 90 days post-termination is common for early-stage startups. Longer windows are more employee-friendly but create accounting and valuation complexity.