restricted stock purchase agreements
Restricted Stock Purchase Agreements are legal documents that set forth the terms and conditions upon which an individual receives stock in a company. In the case of Restricted Stock Purchase Agreements (or, RSPAs), the stock is restricted. This means that the stock vests over time. While the full amount of the stock may be indicated in the grant, the stock is not available for ownership or resale until it vests.
Founders are often opposed to the idea of vesting because it can potentially limit their ownership. However, one of the most common (and avoidable) reasons for company failure is disputes among founders. These disputes often lead to one or more found leaving the company. If a founder leaves the company and maintains a very large ownership stake in the company, this can create significant long-term problems. The company will need to give equity to new employees to fill the original founder's place. Investors may not want to invest in a company largely controlled or owned by a person who is no longer active in running the company, and the other founders may feel taken advantage of given that they are now working harder for the same outcome and potentially enriching a founder who is no longer working.
For these reasons, most sophisticated founders will vest themselves and their other founders to create an incentive for each team member to remain helpful and engaged in making the business successful. This will also help to mitigate hard feelings in the event that a founder decides to leave. With an RSPA in place, this does not pose significant challenges because the departing founder will forfeit much of his or her equity. This will give the remaning founders more equity for their work if they choose no to hire somebody else or more equity to give a new hire.
stock purchase agreements
Stock Purchase Agreements (SPAs) are similar to Restricted Stock Purchase Agreements but they place no vesting requirement on the receiver of the stock. There are two ways a person might receive stock. He or she can receive stock as compensation for non-monetary value: founding a company, contributing intangible resources, or contributing hard, non-cash resources. Or he or she can receive stock for investing money into the business. In most cases when a person invests hard dollars into a business their stock is not vested. Thus they receive a Stock purchase Agreement not a Restricted Stock Purchase Agreement.
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