Founder shares are issued in full at incorporation, so vesting works in reverse: the founder holds and votes the shares from day one, and the company may **buy back** the unvested portion if they leave early. That structure is what makes it workable — the founder is a real shareholder throughout, not someone waiting to become one.
Founder Vesting Agreement
Reverse vesting of founder shares
Founder shares are issued in full at incorporation, so vesting works in reverse: the founder holds and votes the shares from day one, and the company may buy back the unvested portion if they leave early. That structure is what makes it workable — the founder is a real shareholder throughout, not someone waiting to become one.
| Item | Detail |
|---|---|
| Company | [COMPANY NAME], UEN [UEN] |
| Founder | [NAME], NRIC [NUMBER] |
| Shares held | [NUMBER] ordinary shares |
| Vesting commencement date | [DATE] — backdated to when work actually began |
| Credit for time already served | [12] months |
| Vesting period | [4] years |
| Cliff | [None, given the credit / 12 months] |
| Vesting frequency after the cliff | [Monthly] |
| Buyback price for unvested shares | [Nominal value / the amount paid] |
| Fully vested on | [DATE] |
| Voting and dividends on unvested shares | Retained by the Founder |
| Governing law | Singapore |
1. How This Works
1.1The Founder holds [NUMBER] shares, issued at incorporation and registered in the Founder’s name.
1.2A proportion of those shares is Unvested at any time. Unvested Shares are subject to the Company’s right of buyback under Clause 4.
1.3Shares Vest progressively, so that the number subject to buyback reduces over time and reaches nil on the Fully Vested Date.
1.4The Founder retains voting rights and dividends on all shares, vested and unvested, while they remain a Founder.
1.5This is reverse vesting. The founder does not earn shares over time — they hold them from the start and progressively cease to be at risk of losing them.
2. Vesting Schedule
2.1The Vesting Commencement Date is [DATE], being the date the Founder began working on the business.
2.2In recognition of work already performed, [12] months of vesting is credited at the outset.
| Point | Months from commencement | Vested shares | Unvested shares | Percentage vested |
|---|---|---|---|---|
| At signing — credited | [12] | [NUMBER] | [NUMBER] | [25]% |
| Month 18 | [18] | [NUMBER] | [NUMBER] | [37.5]% |
| Month 24 | [24] | [NUMBER] | [NUMBER] | [50]% |
| Month 36 | [36] | [NUMBER] | [NUMBER] | [75]% |
| Month 48 — fully vested | [48] | [NUMBER] | Nil | 100% |
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These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
Founder shares are issued in full at incorporation and made subject to buyback, rather than issued progressively as they vest. The founder is a shareholder from day one with full voting and dividend rights. Documents drafted as though the founder acquires shares over time do not match how the shares were actually issued.
Founders who have worked unpaid for a year or two before a financing have a strong case for that period counting towards vesting. It is routinely granted when asked for and almost never volunteered. Without it, the clock restarts and the earlier work counts for nothing.
If unvested shares can only be bought back at market value, a departing founder is made whole and the remaining founders bear the entire cost. Nominal value or the amount paid is what makes vesting meaningful. This is not punitive — it is the point.
A definition extending to conduct the board considers detrimental hands the board a power to expel a founder and strip vested equity during a disagreement. Confine it to dishonesty, fraud, gross misconduct and material unremedied breach. This is the single most contested provision in founder documents.
Buying back vested shares even from a bad leaver is aggressive, and it means a founder who worked for three years can lose everything for a single act of misconduct. Where it is included, keep the trigger extremely narrow and consider a price at the amount paid rather than nominal.
Single-trigger acceleration leaves a buyer with fully vested founders free to walk on completion, which reduces the price or leads the buyer to demand a restructure. Double trigger — acceleration only if the founder is then removed or materially demoted — protects the founder without undermining the deal.
A founder removed by investors without having done anything wrong, and who then loses their unvested shares, has a genuine grievance. Partial acceleration on removal without cause is reasonable and worth negotiating for.
Suspending vesting during maternity, paternity, shared parental or medical leave disadvantages founders on protected grounds. Clause 2.4 keeps it running, and this should be the default rather than a concession.
Clause 4.5 lets the company execute the transfer if a departing founder refuses. Without it, an acrimonious departure can leave unvested shares stuck with someone who will not sign, and the only remedy is litigation.
Backdating to reflect work already done is legitimate and common. Changing it later without a documented decision is not, and it is the kind of thing that surfaces in diligence as evidence of loose record keeping.
Different vesting terms between founders in similar roles create resentment that outlasts the vesting period. Where terms genuinely differ — because one founder joined later or contributes less — record the reason in the founders’ agreement.
Computing vesting when a founder resigns invites error and dispute, particularly where the commencement date was never properly recorded. Annexure A should be current at all times and reconcilable to the cap table.
The buyback right needs to work alongside the constitution’s transfer provisions and any pre-emption rights. An agreement that gives the company a buyback right the constitution does not accommodate creates a conflict at exactly the wrong moment.
The treatment of shares issued at nominal value that vest as the company grows depends on the facts and differs from an employee share award. A founder who is not a Singapore citizen or permanent resident should also take advice before leaving Singapore while holding equity.
Reflects Singapore law and practice current as of {{DATE OF USE}}. Market terms move, VIMA publishes model documents that address vesting, and the tax treatment of founder equity changes — have vesting arrangements reviewed by a corporate lawyer and the tax position by an adviser.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.