Adding a cofounder
Treat a new cofounder like the original founders in every way but one: their stock no longer costs what it did at formation. The founders bought at a fraction of a cent because the company was worth nothing. If it has since raised a SAFE, signed customers or built something valuable, its common stock is worth more, and a new cofounder must either pay that value or treat the difference as taxable income. A tax adviser can help determine fair market value, and once the company has a 409A valuation that is the usual reference.
There are three common approaches. The new cofounder can buy restricted stock at fair market value and file an 83(b) election, which is simplest while the value is still low. They can buy restricted stock below value and pay income tax on the difference in the year of the election; sometimes the company pays a bonus to cover it. Or they can receive stock options at the current fair market value, which costs nothing at grant but means paying the exercise price later.
Agree on the number of shares, the vesting schedule (usually four years with a one-year cliff, starting when they began full-time work) and their role. Have the board approve the issuance or grant, and have stockholders elect them if they are joining the board. Have them sign the stock agreement, which should include an assignment of prior work and confidentiality terms, pay for the shares and file the 83(b) election within 30 days. If the company has investors, check whether their agreements require consent for new issuances or board changes.
A cofounder leaving
Founders leave more often than anyone expects, and the founder documents exist mostly for this moment. Work through it calmly and in writing.
The unvested shares are subject to the company's repurchase option at the price the founder paid. Under Corply's founder agreement the company has two months from the departure date, and the repurchase happens automatically at the end of that period unless the company decides otherwise. The company pays the original purchase price for those shares and records the repurchase. The vested shares remain the founder's, still subject to the company's right of first refusal and transfer restrictions, so a departed founder with a large vested stake remains a stockholder with all the rights that come with it, which is one reason vesting matters. Acceleration applies only if the triggers in the founder's agreement occurred; under Corply's double-trigger terms, a departure without an acquisition accelerates nothing.
Their roles end separately. An officer can resign by written notice, and the board can remove an officer at any time. A director can resign by written notice too; if they do not, stockholders holding a majority of the voting shares can generally remove them by written consent, and the board or stockholders then fill the seat or shrink the board. Update bank signatories and every account the departing founder controlled, including cloud services and domain registrars.
A short separation agreement signed by the founder and the company avoids most later disputes. It typically confirms the vesting status and the repurchase, confirms the resignations from the board and from office, reaffirms the assignment of intellectual property and the confidentiality obligations, provides for the return of company property and passwords, and includes a mutual release of claims. If the company offers anything extra, such as accelerated vesting or a payment, the release is what it gets in return.
Investors, lenders and key partners should hear about a departure from the company, early and with a plan. Update the stock ledger, your bank, and the state's records where the founder was listed, such as the director list on the next Delaware annual report.
Directors and officers generally
The same mechanics apply to any change. The board appoints and removes officers, and an officer can resign by written notice. Stockholders elect and remove directors, though the bylaws often let the board fill a vacancy, and a director can resign by written notice. The bylaws say who may change the size of the board. After a priced round, the charter and a voting agreement usually also say who appoints which seats, so check them before any board change.