Vesting exists to answer one question: what happens to equity when someone leaves early. Getting it wrong in either direction is expensive — a founder who walks after six months holding a quarter of the company, or a team that discovers a cliff nobody explained. Founder vesting in particular is easier to agree before an investor requires it.
Vesting
Schedules, acceleration and founder vesting
Vesting exists to answer one question: what happens to equity when someone leaves early. Getting it wrong in either direction is expensive — a founder who walks after six months holding a quarter of the company, or a team that discovers a cliff nobody explained. Founder vesting in particular is easier to agree before an investor requires it.
| Item | Detail |
|---|---|
| Company | [COMPANY NAME], UEN [UEN] |
| Applies to | [Employee options / Employee awards / Founder shares] |
| Standard schedule | [4] years, [12]-month cliff, then [monthly] |
| Vesting commencement date basis | [Date of joining / Date of grant / Date agreed] |
| Acceleration on exit | [None / Single trigger / Double trigger] |
| Leaver treatment | [See the table in Section 4] |
| Approved by | [NAME], [DESIGNATION], on [DATE] |
1. Schedule Patterns
| Pattern | How it works | Suits | Watch out for |
|---|---|---|---|
| 4 years, 1-year cliff, then monthly | Nothing vests for 12 months, then 25 per cent, then 1/48 monthly | Employees; the market default | A leaver at month 11 gets nothing — make sure they know |
| 4 years, no cliff, monthly from day one | 1/48 each month | Senior hires with negotiating power | Someone leaving at month two keeps a slice |
| 3 years, annual instalments | One-third on each anniversary | Share awards; simpler to administer | Lumpy — a leaver one day before an anniversary loses a full year |
| Back-weighted | Smaller early instalments, larger later ones | Retention over a long horizon | Feels punitive; can deter acceptance |
| Milestone-based | Vests on defined outcomes rather than time | Advisers; performance awards | Milestones must be objectively measurable or they generate disputes |
| Founder — 4 years with credit for time served | Vesting commencement backdated to when the founder actually started | Founders at a first financing | Investors will negotiate how much credit is given |
2. Standard Schedule Worked Through
| Month from commencement | Vesting event | Cumulative vested | Percentage |
|---|---|---|---|
| 0–11 | Nothing — cliff period | 0 | 0% |
| 12 | Cliff — 25 per cent vests in one step | [NUMBER] | 25% |
| 13–47 | 1/48 per month | [NUMBER] rising | [Rising] |
| 24 | — | [NUMBER] | 50% |
| 36 | — | [NUMBER] | 75% |
| 48 | Final instalment | [NUMBER] | 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 vesting protects the founders who stay from the one who leaves after six months holding a third of the company. Agreeing it at incorporation is a conversation between equals; having it imposed by an investor at a term sheet is a negotiation under pressure that damages relationships. The earlier conversation is uncomfortable and much cheaper.
Founders who have worked unpaid for two years before a financing have a strong case for that period counting towards vesting. Investors will negotiate the amount. Raise it explicitly rather than accepting a schedule that restarts the clock, which effectively values the earlier work at nothing.
Founder shares are usually issued in full and made subject to buyback rather than issued progressively. The founder votes and receives dividends throughout; what is at risk is the unvested portion on early departure. Confirm the voting and dividend position expressly — it is frequently assumed rather than documented.
If unvested founder shares can be bought back only at market value, the provision achieves nothing — a departing founder is made whole and the remaining founders bear the cost. Nominal value or the amount paid is the standard and is what makes the mechanism work.
A bad leaver definition extending to conduct the board considers detrimental hands the company a discretion that is easy to misuse and hard to defend. Confine it to dishonesty, serious misconduct, material breach and criminal conviction. Broad definitions are the single most contested point in leaver provisions.
An employee made redundant at month eleven receives nothing, through no fault of their own. Consider disapplying the cliff, or pro-rating, where the company terminates without cause. It costs little and the alternative is visible to everyone who remains.
Suspending vesting during maternity, paternity, shared parental or medical leave disadvantages employees on protected grounds and will be hard to defend once the Workplace Fairness Act commences. Keep it running.
Age is a protected characteristic, and the statutory retirement and re-employment framework already constrains how employers treat older workers. A leaver table that penalises retirement more heavily than resignation is a discrimination risk as well as poor practice.
Single trigger leaves a buyer with a fully vested team free to walk on completion, which reduces what the buyer will pay or leads them to demand a restructure. Double trigger protects the individual against being acquired and then dismissed, without undermining the deal. Partial single trigger is the middle ground.
Whatever the acceleration position, participants need enough notice to decide whether to exercise, and to understand the tax. Fourteen days is a minimum. Discovering the treatment at completion, with no time to act, is how equity schemes generate lasting bitterness.
Computing vesting when someone resigns invites error and dispute, particularly where the vesting commencement date was never properly recorded. The tracker should be current at all times, and it should be reconcilable to the option register and the cap table.
Backdating to reflect service already given 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.
Exercising discretion generously for one departing employee and not another, in similar circumstances, is noticed and remembered. Where discretion is exercised, record the reason — it forces the comparison to be made deliberately.
Vesting on outcomes works only where the outcome is objectively verifiable and outside the discretion of the person deciding. Vague milestones produce disputes at exactly the point when the participant has already done the work.
Reflects Singapore practice current as of {{DATE OF USE}}. The tax treatment of equity, the deemed exercise rule for departing non-citizens, and the pending Workplace Fairness Act all bear on vesting design — have vesting provisions reviewed by a corporate lawyer, and take tax advice on founder buyback arrangements.
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.