Shareholder / Co-Founder Equity Vesting Agreement

Shareholder / Co-Founder Equity Vesting Agreement: a practical guide

A Shareholder / Co-Founder Equity Vesting Agreement describes how a founder earns ownership shares over time or after agreed milestones. It also explains what the parties intend to happen to vested and unvested shares if a founder leaves or another agreed event occurs.

What it's for

Founders use this document when they want ownership to build over time instead of giving each person all of their planned shares at the start. It can record the vesting schedule, when vesting begins, and the conditions each founder must meet.

The agreement can help the founders discuss what happens if someone stops working with the business, leaves voluntarily, or cannot continue. It should make clear how vesting relates to shares already issued, future share transfers, and the company’s records.

AnAgreement.com provides a general form helper, not a vesting-specific clause library or legal review. Write any vesting terms the form's fields don't cover in “Additional Terms & Provisions,” and use the form’s “Company” and “Shareholder” labels to identify the parties. If the parties mainly need rules for running a partnership or company, a different type of agreement may fit better.

Who uses it

• Co-founders who plan to earn ownership through continued work for a new business.
• Existing shareholders who agree that some ownership will vest over time.
• Founders who want specific business milestones to affect when shares are earned.
• A company and its founders when documenting what they intend to happen to unvested shares after a founder leaves.

Terms to decide on

Shares covered and parties

Identify the company, each founder, and the shares or percentage covered by the arrangement. Clarify whether the shares have already been issued, will be issued later, or are expected to be transferred by another shareholder.

Vesting start and schedule

State when vesting begins and how much ownership vests at each point. Use dates, time periods, or clearly described milestones so each person can work out what has vested.

Initial waiting period

If the parties agree that no shares vest until an initial period has passed, state what happens at the end of that period. Explain how the schedule proceeds afterward and whether any vesting is credited for earlier work.

Milestones and continued work

Describe each milestone in terms the parties can check, including who decides whether it has been met and how that decision is recorded. If vesting depends on continued work, define what counts as leaving or stopping that work.

Departure and unvested shares

Explain what the parties intend to happen to unvested shares if a founder leaves, dies, becomes unable to work, or is removed from a role. Describe any proposed return or buyback process and how any price or steps will be determined; check that the approach fits the company’s structure and local rules.

Vested shares and share rights

Say whether a founder keeps vested shares after leaving and identify any agreed limits on transfer. Clarify when voting, distribution, or other share rights begin, especially if shares are issued before they vest.

Changes and early vesting

Decide whether a sale of the business, a major role change, or another named event changes the schedule. State whether vesting speeds up, continues, or stays the same, and whether all founders are treated alike.

Common mistakes

• Writing only “four-year vesting” or another shorthand without defining when vesting starts and how shares vest along the way.
• Using vague performance goals that leave the founders unsure who decides whether a milestone was met.
• Failing to say what happens to unvested shares when someone leaves or what happens to vested shares if a transfer is proposed.
• Treating a percentage as a fixed number of shares without explaining what happens if the company later issues more shares.
• Assuming this agreement by itself issues shares, changes company records, or overrides the company’s other documents.
• Using a general form without checking whether its party labels and fields fit the relationship and the vesting terms the founders need.

Before you sign

• Confirm that the company name, each founder’s identity, and the shares or percentage covered are stated consistently.
• Read the schedule from start to finish and confirm it produces the intended ownership at each stage.
• Check that departure, buyback, transfer, and early vesting terms are understandable to every party.
• Compare the agreement with the company’s existing ownership records and other company documents.
• Confirm who must approve or record any share issue, return, or transfer.
• Check local requirements for signing, witnesses, notarization, registration, notice, and required wording; seek advice from a qualified lawyer when a lot is at stake.