Vesting

Vesting means that shares or options are earned over time rather than all at once. As a founder, employee or adviser stays with the company or reaches milestones, a larger part of their shares becomes final. A person who leaves keeps only the shares earned up to that point.

Typical Structure

• Term: The most common schedule in practice is four years.
• Cliff: No shares vest before the first year; when the year ends, a quarter of the shares vest.
• Gradual vesting: After the cliff, the remaining shares vest in monthly or quarterly instalments.
• Performance-based vesting: Part of the shares may be tied to revenue, product or fundraising milestones.
• Acceleration: Some or all unvested shares vest immediately on a sale of the company. Under single-trigger acceleration, the sale is enough; under double-trigger acceleration, the person’s employment must also be terminated without cause after the sale.

Reverse Vesting of Founder Shares

Founders acquire their shares on incorporation, so for them vesting works in “reverse”: the shares belong to the founder from the outset, but if the founder leaves before the schedule ends, the unvested shares can be bought back at a set price. That price depends on how the founder leaves; see Leaver Provisions.

Application under Turkish Law

There is no specific regulation of vesting in Turkish law. In practice:

• Vesting of founder shares is structured in the shareholders’ agreement as a call option granted to other shareholders or investors. Since a company’s acquisition of its own shares is restricted under the Turkish Commercial Code (TCC Art. 379), the call option is usually granted to shareholders.
• To make the right enforceable, a power of attorney is obtained from the departing founder in advance and a contractual penalty is provided for breach.
• Employees are usually granted vesting options under an employee stock option plan.

Vested and unvested shares should be tracked separately in the cap table.