How do I protect myself in a co-founder’s contract?
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How do I protect myself in a co-founder’s contract?
I’ve been asked to join a single-person startup as co-founder. He has already coded the app and incorporated a company, of which he is CEO and sole board member. I work for equity. The severability clause in the contract reads: “All provisions of this agreement are fully severable”. This means he can, say after I have worked for 11 months, sever the contract (I have a year cliff in my vesting schedule). I thus get nothing for 11 months of work. How do I protect myself? Can I suggest a clause protecting myself from ‘termination’ by immediate vesting of X% if I am terminated from position of founder without cause. How do I phrase that though and what is a reasonable percentage?
Asked on December 2, 2015 under Business Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 8 years ago | Contributor
Actually, that's not what that provision means: what it means if that if one clause or term is found to be uneforceable for some reason (for example: it conflicts with a statute), it can be "severed" from the contract and the rest of the contract can be enforced.
That said, you should negotiage for some protection in the event the found terminates your position with the company: getting a payment or having stock vest in that event is appropriate.
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