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A company provides equity for its permanent and contractual resources on different terms. But the profits are paid to shareholders in a predetermined order called the preference stack. If you hold 0.5% of the company, you wrongly assume that you are entitled to 0.5% of the acquisition. This clause is included to protect the interests of investors. Generally, vesting agreements place high-quality investors and employees on the upper echelons of the preferred stack. A liquidity event is a situation in which one company is taken over by another. If the company has achieved good results, a liquidity event is in fact a winning opportunity for all shareholders. They can exchange their shares at such an event. However, the terms of the vesting agreement determine the hierarchical order in the event of a takeover. In general, employees are at the bottom of this pyramid. The “acceleration” clause is an integral part of the founding contracts.

It determines the fate of the founding actions, especially the non-gifted shares, in the face of an unprecedented event in which the management of the company changes control. In such a scenario, three things happen in the first place: the right share vest immediately, the founders continue to work with the new company continues with the existing vesting schedule, or they lose non-rights shares to the new company and leave. The founder must request it and adapt the terms of the vesting agreement accordingly. Jacket agreements are essential for startups. They are used by the co-founders to agree on the use of terms in the greatest possible transparency. As mentioned above, vesting agreements protect the interests of all parties that contribute to the growth of the business. They ensure that ownership of the shares is sufficiently limited and is earned to the same extent by fair means corresponding to the contribution of stakeholders to the activities. The conditions are strict enough to ensure that the company does not suffer from the incompetence or lack of commitment of a contributor. All parties involved should be aware of their commitments in the event of early withdrawal. Remember what Vesting is? When it comes to options, vesting is how you deserve the right to exercise options.