Vesting is the most important clause in a founder agreement that most Irish founders have never properly understood. It is the difference between a partnership that can recover from a founder departure and one that cannot. It is also the single clause every Irish or international investor will require — and the one founders most consistently resist drafting at incorporation.
This guide explains what vesting is, why it matters specifically for Irish startups, how to structure it, and what happens — to both the company and the departing founder — when it is missing.
What vesting actually means
Vesting means that founders earn their equity over time rather than receiving it in full at incorporation. Shares are issued at incorporation — but if a founder leaves before they have fully "vested," the unvested portion is repurchased by the company, typically for nominal value.
The standard structure: a four-year vesting period with a one-year cliff. For the first twelve months, no equity vests. At the one-year mark, 25% vests in a single block. The remaining 75% then vests monthly or quarterly over the following three years.
| Time elapsed | Equity vested (of original allocation) | Equity unvested (subject to repurchase) |
|---|---|---|
| 6 months | 0% | 100% |
| 12 months | 25% | 75% |
| 24 months | 50% | 50% |
| 36 months | 75% | 25% |
| 48 months | 100% | 0% |
Why vesting exists
Imagine the worst case for any startup: a co-founder who leaves at month four with 50% of the company. Without vesting, those shares are theirs forever. The remaining founder is now committed to building a business in which half of the future upside belongs permanently to someone who is no longer there.
With vesting, the company has a clean mechanism to recover the unearned portion. The departing founder keeps what they have earned (in this example, none); the company recovers the rest and uses it to compensate whoever continues the work.
Founders without vesting who experience an early departure rarely recover. The encumbered cap table makes future hiring, investment and even sale of the company materially more difficult.
Why founders resist vesting
The objection is almost always the same: it feels like an accusation of disloyalty. "We agreed we are committed for the long term. Why would we need vesting?"
The answer is that vesting is not a statement about commitment — it is a structural protection that applies symmetrically to both founders. It protects you from your co-founder leaving, and it protects your co-founder from you leaving. Refusing vesting is therefore a structural risk to whichever of you is more committed.
More practically: any institutional investor will require vesting as a condition of funding. Putting it in place now is far easier than retrofitting it later, when it becomes a negotiation under pressure.
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Run the free check →Cliff and acceleration
The one-year cliff
The cliff exists for a specific reason: to ensure that a founder who joins, fails to perform or leaves within the first year walks away with no equity. This is the highest-risk window for any new partnership and the cliff is what makes the early-departure scenario survivable.
Single-trigger and double-trigger acceleration
Acceleration clauses determine what happens to the unvested portion in specific events.
- Single-trigger acceleration: all unvested shares vest immediately on a defined event (typically a sale of the company).
- Double-trigger acceleration: unvested shares vest only if both a sale occurs and the founder is terminated without cause within a defined period thereafter.
Double-trigger is the international norm and the version most investors will accept. Single-trigger is rare and generally resisted by acquirers because it removes their leverage to retain the founders post-acquisition.
Good leaver, bad leaver
Vesting interacts with departure circumstances. Most well-drafted Irish founder agreements distinguish between:
- Good leavers: death, long-term illness, retirement, departure by mutual agreement. Typically retain all vested shares; unvested shares revert to the company.
- Bad leavers: voluntary departure within a defined period, gross misconduct, breach of contract. May lose some or all vested shares, often via a discounted buyback (e.g. nominal value or a fraction of fair value).
The good-leaver / bad-leaver distinction is one of the most negotiated and most consequential elements of an Irish shareholders agreement. Founders without these provisions often discover, on departure, that the rules they thought existed simply do not.
Irish-specific implementation
Implementing vesting in Ireland is straightforward but requires three things to be done correctly.
- Shares are issued at incorporation, recorded in the CRO filing.
- The shareholders agreement records the vesting schedule, repurchase rights and good-leaver / bad-leaver mechanics.
- Each founder signs the agreement and, where relevant, a separate share repurchase deed.
The vesting schedule itself is not visible to the CRO. It lives entirely in the private shareholders agreement. This means a founder who leaves cannot deny the vesting if it is properly documented — but cannot be bound by vesting that exists only in someone's memory.
Irish solicitors report that the most common implementation error is vesting drafted into the shareholders agreement but not properly tied to the share register and a binding repurchase mechanism. A vesting clause without an enforceable repurchase right is decorative.
Tax considerations
Founders should be aware of three Irish tax points.
First, share issuances at incorporation typically attract no immediate tax charge if shares are issued at par value before the company has accrued material value. Bringing in a co-founder six months in, however, can create a benefit-in-kind charge if the company has demonstrably appreciated. Take advice.
Second, the repurchase of unvested shares for nominal value is generally not a taxable event for the founder, but the structuring matters. Get this in front of an accountant when the agreement is drafted, not after.
Third, founders intending to use the Key Employee Engagement Programme (KEEP) for future hires need to ensure their vesting structure does not inadvertently prevent qualifying status.
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Run the free check →An example: the founder departure that vesting solved
A 2023 Dublin-based health-tech company was incorporated by two founders with a 50/50 split, four-year vesting and a one-year cliff. At month nine, one founder accepted a senior role at a multinational and left the company. Because the cliff had not been reached, all shares were repurchased by the company for nominal value. The remaining founder was free to recruit a replacement co-founder with meaningful equity, and the company subsequently raised a €1.2m seed round on a clean cap table. Without vesting, the same departure would have left a permanent 50% encumbrance and almost certainly prevented investment.
Mistakes Irish founders make
- Refusing to put vesting in place because it feels distrustful.
- Drafting a vesting clause without an enforceable share repurchase mechanism.
- Treating the CRO filing as the vesting record. It is not.
- Using single-trigger acceleration that future acquirers will refuse to accept.
- Failing to update the vesting schedule when bringing in a third founder months later.
- Negotiating vesting under investor pressure instead of agreeing it at incorporation.
Conversation prompts
- If one of us leaves at month four, what should they walk away with?
- If one of us leaves at month thirty, what should they walk away with?
- What counts as a good leaver, and what counts as a bad leaver?
- If we are acquired in three years, what acceleration do we both want?
- Are we comfortable with the same vesting schedule applying to whichever of us leaves?
- Founders who agree vesting at incorporation rarely revisit the clause again — it does its job quietly in the background.
- Founders who skip vesting and later experience a departure consistently describe it as the single most consequential omission of their first year.
- Investors require vesting. Putting it in place now is materially easier than negotiating it later under term-sheet pressure.
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Run the free check →Frequently asked questions
- What is the standard vesting schedule for Irish co-founders?
- Four years with a one-year cliff. No equity vests in the first twelve months; 25% vests at the one-year mark; the remaining 75% vests monthly or quarterly over the following three years. This is the international norm and what every credible investor will expect.
- Is vesting legally required in Ireland?
- No. Irish company law does not require vesting. It is a contractual mechanism implemented through the shareholders agreement. It is, however, effectively required by any institutional investor and is now standard practice for serious Irish startups.
- Can we add vesting after incorporation?
- Yes, but it requires unanimous founder agreement, amendment of the shareholders agreement, and a properly drafted share repurchase right. The cleanest moment to add vesting is at incorporation; the second cleanest is now.
- What happens to vested shares if a founder leaves?
- Vested shares are typically retained by the departing founder. Unvested shares revert to the company, usually via repurchase at nominal value. Bad-leaver provisions can change the treatment of vested shares in specific circumstances.
- What is single-trigger versus double-trigger acceleration?
- Single-trigger accelerates vesting on a single event, typically a sale. Double-trigger requires both a sale and a termination without cause. Double-trigger is the international standard and the version acquirers and investors expect.
Most disputes begin long before the first legal disagreement.
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