Founder Equity Issuance

founder-equity-issuance

Agent: Corporate Counsel

L2 corporate counsel (1x) responsible for compliance scanning, legal risk register, third-party TOS review, entity formation, corporate governance, and founder equity.

Department ethos: ideal-legal.md

Skill Description

Manages the issuance of founder equity including drafting restricted stock purchase agreements, establishing vesting schedules, and ensuring proper board authorization and securities compliance.

When to Use

• When co-founders have agreed on equity splits and need the legal documents to formalize share issuance.
• When a new co-founder or key early hire is joining and needs to receive founding-level equity with vesting.
• When the company needs to restructure founder equity before a fundraising round (e.g., adding reverse vesting to unvested founder shares).

Workflow

1. Equity Structure Design: Using the vesting terms and multi-founder considerations in references/framework.md, confirm the number of shares, share class, par value, vesting schedule (standard 4-year with 1-year cliff), acceleration provisions (single vs. double trigger), and repurchase rights. Document split rationale for multi-founder teams. Deliverable: founder equity term sheet.
2. Board Authorization: Prepare board resolutions per the authorization requirements in references/framework.md. Authorize issuance of shares to each founder at the specified price (par value or FMV per 409A valuation). Confirm issuance falls within authorized share limits per Certificate of Incorporation. Deliverable: board consent resolution.
3. Agreement Drafting: Draft the RSPA for each founder using the key terms in references/framework.md: purchase price, vesting schedule, repurchase rights at lower of FMV or cost, transfer restrictions (ROFR), Section 83(b) election acknowledgment, and spousal consent in community property states (CA, TX, WA). Deliverable: executed RSPAs. [GATE]
4. Securities Compliance: Verify the issuance qualifies for a securities exemption per the securities law framework in references/framework.md (Rule 701 limits: greater of $1M / 15% of assets / 15% of outstanding securities; or Section 4(a)(2) / Reg D 506(b)). Prepare state blue sky filings (CA 25102(f)). File Form D if required. Deliverable: securities exemption memo and filings.
5. 83(b) Election Coordination: Notify each founder of the 83(b) election option per the tax considerations in references/framework.md. For par value purchases at formation, taxable income is typically negligible. Produce the equity package using template at assets/founder-equity-package-template.md. Hand off to 83b-election-coordinator for filing within the 30-day deadline. Deliverable: 83(b) election notification, equity package, and handoff confirmation.

Anti-Patterns

• Issuing equity without vesting: Giving founders fully vested shares with no repurchase rights. Why: if a founder leaves early, the remaining founders have no mechanism to recover unvested equity, which damages the cap table and deters investors.
• Verbal equity promises: Agreeing on equity splits verbally without executing stock purchase agreements. Why: verbal agreements are unenforceable for equity transfers and create disputes that can destroy the company.
• Ignoring securities law: Issuing shares without confirming a securities exemption. Why: unregistered securities offerings violate federal and state law, creating rescission rights and personal liability for officers.

Output

On success: Produces executed RSPAs for each founder, board authorization resolutions, securities exemption documentation, and 83(b) election handoff. Delivered to founders with copies in the corporate minute book.

On failure: Report which issuances could not be completed (e.g., unresolved equity split, missing board authorization, securities exemption uncertainty), what the current equity status is, and what decisions or filings are needed. Escalate to General Counsel.

Related Skills

• 83b-election-coordinator -- 83(b) elections must be filed within 30 days of restricted stock issuance.
• entity-formation -- The entity must be formed before shares can be legally issued.