Vesting Agreement Template and How to Draft One (2026)

What a vesting agreement is, and when you need one A vesting agreement sets out how a person earns full ownership of their equity over time, rather than owning all of it on day one. It is most common among startup founders, but it also applies to senior hires and advisors who receive shares. The core idea is simple: shares or the right to keep them are earned by staying and contributing over a period, usually four years, often with a one-year cliff before any of it vests. You need a vesting agreement whenever more than one founder holds equity, or whenever shares are issued to someone whose continued involvement matters. Without it, a co-founder who leaves after six months can walk away with a large slice of the company, leaving those who stay to build value for someone who is gone. Investors almost always require founder vesting as a condition of funding, so putting it in place early is far easier than retrofitting it later. In India, founder vesting is usually structured as reverse vesting: the founder holds the shares from the start, but the company (or the other founders) has the right to buy back the unvested portion at a nominal price if the founder leaves. This is because Indian company law makes issuing shares in tranches more cumbersome than a buy-back right over already-issued shares. The template below reflects that structure. Below is a vesting agreement template you can copy and adapt, followed by guidance on how to fill each field. This is general information, not legal advice. Equity, tax and company-law consequences are significant, so have the final document reviewed by a lawyer and a tax adviser. ## Vesting agreement template (founder reverse vesting) ```

FOUNDER VESTING AGREEMENT This Agreement is made on [DATE] Between: [COMPANY NAME], [CIN], of [ADDRESS] (the "Company"); [FOUNDER NAME], of [ADDRESS] (the "Founder"); and [the other founders / shareholders, as applicable]. 1. SHARES SUBJECT TO VESTING The Founder holds [NUMBER] equity shares of the Company (the "Shares"). All of the Shares are subject to vesting under this Agreement. 2. VESTING COMMENCEMENT AND SCHEDULE Vesting Start Date: [DATE, e.g. date of incorporation or joining]. Cliff: no Shares vest until the first anniversary of the Vesting Start Date, on which [25%] vest in one block. Thereafter the remaining Shares vest [monthly / quarterly] in equal instalments over the next [36] months, so that all Shares are vested on the [fourth] anniversary. 3. REVERSE VESTING / BUY-BACK OF UNVESTED SHARES If the Founder ceases to be [a director and/or in continuous service] for any reason, the Company (or the persons it nominates) may buy back the then-unvested Shares at [face value / the lower of cost and fair value] within [N] days, following the procedure in Schedule A. Vested Shares are retained by the Founder, subject to clause 6. 4. GOOD LEAVER / BAD LEAVER Good Leaver: [death, permanent disability, or departure agreed by the Board]. A Good Leaver may retain [a stated portion of unvested Shares / only vested Shares], as agreed. Bad Leaver: [resignation before a date, or removal for cause such as fraud, breach, or gross misconduct]. A Bad Leaver forfeits all unvested Shares and [may be required to sell vested Shares on stated terms]. 5. ACCELERATION Single trigger: on [a change of control / acquisition], [X%] of unvested Shares vest immediately. Double trigger: on a change of control followed by the Founder's involuntary departure within [N] months, [all] unvested Shares vest. [Choose one; double trigger is more common and investor-friendly.] 6. TRANSFER RESTRICTIONS The Founder will not transfer, pledge or encumber any Shares (vested or unvested) except as permitted by this Agreement and the Shareholders' Agreement. The Company's Articles reflect these restrictions. 7. TAX Each party bears its own taxes. The Founder has been advised to take independent tax advice on the consequences of vesting, buy-back and any future sale. 8. GENERAL Governing law: India. Disputes: [arbitration seat / courts]. This Agreement is read with the Shareholders' Agreement and the Company's Articles; in conflict, [state which prevails]. Signed by the Company: __________________ Date: ______ Signed by the Founder: __________________ Date: ______ Schedule A: buy-back procedure, notice and valuation