Cap table problems rarely announce themselves. They surface during due diligence, at the worst possible time.
When someone with equity leaves your company, the offboarding conversation usually focuses on notice periods and handoffs. The equity piece gets treated as an afterthought — until a financing or acquisition puts it under a microscope.
Getting it right requires attention to a few things that are easy to overlook.
Your repurchase window is shorter than you think
Most equity plans give the company a right to repurchase unvested shares when someone departs — but that right typically expires within 90 to 180 days of termination. Miss the window and it is gone. Check your plan documents before the separation date, not after, because the clock starts running whether you are paying attention or not.
Vested shares are a different question. The departing holder has earned those, and any repurchase requires real consideration — meaning a price supported by your current 409A valuation. If the separation is contentious, that negotiation gets harder. Starting from a documented, defensible price makes it cleaner.
The separation agreement does more work than people realize
A well-drafted separation agreement ties the equity mechanics to a broader release of claims, addresses any surviving obligations like confidentiality and non-solicitation, and creates a clear record that the separation was consensual. That record matters if a dispute ever surfaces later.
It is also the moment to confirm IP ownership. If there is any ambiguity about work product the departing person contributed — code, designs, client relationships — address it in the agreement rather than leaving it to inference.
Update your cap table immediately
Once the repurchase is complete, update your records. This sounds obvious, but early-stage companies routinely let it slip. By the time Series A due diligence arrives, an unresolved equity departure from two years prior is a red flag that slows things down and sometimes reopens negotiations you thought were finished.
A clean separation means clean records. The goal is that when someone looks at your cap table six months from now, there is nothing there that requires an explanation.
If you are approaching a departure involving equity, the window to handle it properly is narrow. We help founders get it right before it becomes complicated.
This post is for general informational purposes only and does not constitute legal advice or create an attorney-client relationship.
