Standard Four-Year Founder Vesting Schedules With One-Year Cliff
Standard four-year founder vesting with a one-year cliff protects companies by withholding equity ownership until service time clears contractual repurchase rights.
post-termination repurchase window
Meaning
Time limits for acting on equity rights following a departure define the end of a professional relationship. This post-termination repurchase window specifies how long a former employee has to exercise their vested options before they expire. It also sets the timeframe for a company to buy back shares from a founder or staff member who is leaving.
Exercise Period
Participants must often find the cash to pay for their shares and any associated taxes within a short time. The post-termination repurchase window typically lasts between thirty and ninety days, though some modern agreements extend this period significantly to provide more flexibility for long-term employees. Forcing a quick decision can lead to the loss of equity for individuals who cannot afford the purchase or the tax liability.
If the window expires without action, the shares usually return to the company treasury.
Governance Control
Organizations use this period to regain control over their stock and prevent it from being held by outsiders. A post-termination repurchase window allows the firm to buy back shares at a predetermined price, which keeps the ownership pool concentrated among active contributors. This process helps maintain a clean cap table for future investment rounds.
Funding Requirement
Buying back stock requires the company to have enough liquid capital on hand to complete the transaction. During the post-termination repurchase window, the board must decide if spending cash to consolidate ownership is a better use of funds than investing in operations. The decision depends on the current cash balance and the strategic value of the shares.