What's in a founder restricted stock purchase agreement

If you're incorporating a Delaware C-Corp, the restricted stock purchase agreement is the document that turns your founder split into actual shares. It is also the document investors and acquirers read most closely about founders, because it decides what happens to your equity if you leave.

A founder restricted stock purchase agreement (RSPA) is a contract between a founder and the company under which the founder buys shares at a nominal price, subject to vesting. It sets the number of shares and the price, how the founder pays, the vesting schedule, the company's right to buy back unvested shares, any acceleration on a sale, and restrictions on transferring the shares. It usually comes with exhibits for the IP assignment, the 83(b) election, a stock power, and a spousal consent.

Below is what each section does, how the repurchase right works in numbers, and what to check before signing.

The main sections of a founder RSPA

The purchase terms fix the shares and the price

Shares and price. The agreement states the number of shares and the price per share, which is usually equal to or slightly above par value. At $0.00001 per share, 4,000,000 shares cost $40.

Consideration. The founder pays in cash, by assigning intellectual property to the company, or both. When IP is part of the payment, the agreement or a separate technology assignment should describe the IP specifically and run from the person who created it. Code, designs, and domains built before incorporation belong to the founder until they are assigned.

Consistency with other documents. The share count, price, and vesting terms must match the board consent that approved the issuance, and the total shares issued to all founders plus any option pool cannot exceed the authorized shares in the certificate of incorporation.

The repurchase option is what makes the stock restricted

Founders own their shares from the closing date. They vote them and count them in ownership. What vests is not the shares themselves but the company's right to take them back.

How it works. If a founder stops providing services to the company, the company has the right to repurchase any unvested shares, usually at the lower of the original purchase price or the current fair market value. As shares vest, the repurchase right lapses on those shares.

The exercise window. The company typically has a set period after the founder's departure, often 90 days, to exercise the option. Some agreements make the repurchase automatic unless the company declines.

Vesting schedule. The standard is four years with a one-year cliff. Nothing vests in the first 12 months, 25% vests at the first anniversary, and the rest vests monthly over the following three years. The schedule runs from the vesting commencement date stated in the agreement, which can be earlier than the purchase date if the founders negotiated credit for work before incorporation.

A worked example

Northwind Labs, Inc. issues 4,050,000 shares to its CEO, Maya, at $0.00001 per share. She pays $40.50. Her RSPA has a four-year schedule with a one-year cliff.

Maya leaves after 18 months. By then, 18 of 48 months have vested, so 1,518,750 shares are vested and stay with her. The remaining 2,531,250 shares are unvested. Northwind exercises its repurchase option and buys them back at the original price, paying $25.31.

Had Maya left at month 11, before the cliff, none of her shares would have vested and Northwind could repurchase all 4,050,000 for $40.50.

Acceleration and transfer restrictions shape the exit

Acceleration. Single-trigger acceleration vests some or all unvested shares on a sale of the company alone. Double-trigger acceleration requires a sale and the founder's termination without cause, or resignation for good reason, within a set period after the sale. Double-trigger is more common for founders, because acquirers resist single-trigger terms. Many agreements accelerate a portion, such as 25% or 50% of unvested shares, rather than all of them.

Right of first refusal. If a founder wants to sell vested shares to a third party, the company, and sometimes its investors, can buy them on the same terms first.

General transfer restrictions. Unvested shares usually cannot be transferred at all, apart from narrow exceptions such as transfers to a trust for estate planning, where the shares stay subject to the same terms.

Market standoff. A lock-up provision prevents founders from selling shares for a period after an IPO, commonly up to 180 days.

Legends. Certificates, or the notice sent for uncertificated shares, carry legends stating the restrictions.

The supporting documents are part of the deal

Stock power and escrow. The founder signs a stock assignment separate from certificate, often called a stock power, left blank and held by the company or an escrow agent. It lets the company complete a repurchase without needing a new signature from a founder who has left.

Representations. The founder confirms they are buying for investment, understand the shares are unregistered and restricted, and have had the chance to get their own tax advice. The tax representation matters because the agreement usually makes the founder, not the company, responsible for the 83(b) election.

83(b) election. Most RSPAs attach an 83(b) form or remind the founder to file one. The 30-day deadline runs from the date the shares are transferred and cannot be extended. The election can be filed online through an IRS online account using Form 15620, or on paper.

Spousal consent. In community property states such as California and Texas, a founder's spouse may have a property interest in the shares. A signed spousal consent keeps the repurchase right and transfer restrictions enforceable against that interest.

Invention assignment agreement. Founders also usually sign a confidential information and invention assignment agreement covering IP they create for the company going forward. It should be dated on or before the RSPA.

What to check before signing

The numbers match. Share count, price, par value, and vesting terms are the same in the RSPA, the board consent, and the certificate of incorporation.

The dates are in order. The certificate is filed first, then the incorporator action, the board consent, the RSPAs, and the invention assignment agreements. Each document carries the date it was actually signed. If the sequence is out of order, the fix is a ratification consent, not new dates.

The 83(b) deadline is calendared. Day 30 is counted from the transfer date, and the election is best filed the same week.

The IP assignment is specific. It names the IP and comes from the founder who created it.

Restrictive covenants fit the founder's country. Non-compete and some post-employment restrictions may be unenforceable for founders outside the US, which local counsel should review.

How Inkle fits in

Inkle Incorporation assists with Delaware C-Corp incorporation.

The bottom line

A founder RSPA does three jobs: it issues the shares, it ties them to continued work through vesting and the repurchase option, and it controls how they can leave the founder's hands. The terms that matter most in practice are the repurchase price and window, the acceleration trigger, and whether the founder files the 83(b) election within 30 days. Most problems with these agreements come from inconsistency rather than drafting: numbers that don't match the board consent, dates out of order, or an IP assignment that doesn't name the IP. Those are cheap to check at signing and expensive to fix in diligence.

Frequently asked questions

What is a founder restricted stock purchase agreement?

It is a contract under which a founder buys shares from the company at a nominal price, subject to vesting. The company can repurchase unvested shares if the founder leaves. It also covers payment, acceleration, transfer restrictions, and the 83(b) election.

What happens to my shares if I leave the company?

You keep your vested shares. The company can repurchase your unvested shares, usually at the lower of what you paid or their current fair market value, within a set period after you leave.

Do I own my shares before they vest?

Yes. Founder restricted stock is issued and owned from the purchase date, and you can vote it. Vesting only determines how many shares the company can buy back if you leave.

Can I pay for founder shares with intellectual property?

Yes. Delaware allows property, including IP, as payment for shares if the board approves it. The assignment should describe the IP specifically, and many founders combine it with a small cash payment.

Do I need to file an 83(b) election with my RSPA?

If your shares are subject to vesting, you should file one within 30 days of the transfer date. Without it, each vesting tranche is taxed as ordinary income at its value when it vests. The deadline cannot be extended.

What is a stock power in a founder stock agreement?

It is a signed transfer form, left blank and held by the company or an escrow agent. It lets the company complete a repurchase of unvested shares without needing a new signature from the departing founder.