A cofounder leaving is one of the most delicate moments in a startup's life. Sometimes it is agreed, sometimes it comes out of nowhere. Either way, three questions are left open: their shares, the code they wrote, and the relationships with customers. If these weren't settled in advance, they need settling now, and how you do it decides whether the company can get going again.
This article sets out the general picture for a startup incorporated as an Italian srl (limited liability company). It is general information, not legal advice: for your case, talk to a corporate lawyer and, for tax aspects, to your accountant.
In brief
- Without an agreement, a departing cofounder remains a shareholder with all their shares and rights. They lose nothing automatically.
- Good leaver and bad leaver clauses, usually in a shareholders' agreement or the articles of association, set the price and terms on which a leaver's shares are bought back.
- Vesting does not exist as such in an Italian srl. It is rebuilt with call options on shares and, for innovative startups and SMEs, with the tools in art. 26 of DL 179/2012.
- For software, the employer owns the economic rights only in code written by an employee as part of their job. A founder who is not an employee and never signed an assignment may still own their code.
- Customer contracts belong to the company, not to individuals, so they stay put. Moving them to another company generally requires the customer's consent.
Shares: what happens without any agreement
In an srl, shares (quote) are freely transferable unless the articles of association say otherwise (art. 2469 Civil Code). That also cuts the other way from what many founders expect: if a cofounder stops working on the startup but doesn't sell, they remain a shareholder. They keep voting at shareholders' meetings, are entitled to their share of profits and keep their information rights.
There is no automatic way to take back the shares of someone who no longer works on the project. The options are:
- a negotiated transfer with the cofounder, at an agreed price;
- exclusion for just cause, but only if the articles of association set out specific grounds for exclusion (art. 2473-bis Civil Code). In that case the shares are paid out under the withdrawal rules, based on market value, and payment through a capital reduction is not allowed. If the articles say nothing, exclusion is not available;
- clauses in a shareholders' agreement, if there is one.
A significant stake held by a shareholder who is no longer involved can block decisions that need qualified majorities and put off new investors or partners. It is often the first knot to untie in a relaunch.
Good leaver and bad leaver
Leaver clauses give the other shareholders (or the company, where allowed) the right to buy a founder's shares if they leave. The price depends on why they left:
- good leaver: departures treated as "neutral" or not the founder's fault, such as illness, death or, depending on the agreement, leaving after a minimum period. The price is usually close to market value;
- bad leaver: early voluntary departures, serious breaches, breaking a non-compete. The price is usually lower, sometimes just the nominal value.
These clauses are not set by law. They are built contractually, in the articles or in a shareholders' agreement. Whether they hold up depends on how they are drafted, and a price far below real value can be challenged. If your startup has them, have a lawyer review them before you trigger them. If it doesn't, now is a good time to add them for the shareholders who stay and those who join.
Vesting in an srl
In US startups, vesting is standard: a founder's shares "vest" over time, and unvested shares go back to the company if they leave. An Italian srl has no identical mechanism, but you can get a similar effect:
- with call options in favour of the other shareholders over the "unvested" part of the shares, exercisable if the founder leaves before a set date;
- for innovative startups and SMEs, with the tools in art. 26 of DL 179/2012: the articles can create classes of shares with different rights, including non-voting or limited-voting classes, and the company can deal in its own shares, departing from the ban in art. 2474 Civil Code, but only to carry out incentive plans for employees, collaborators, directors or service providers.
Vesting only works if it was agreed beforehand. Bringing it in after a founder has announced they are leaving requires their consent.
The code: who really owns it
This is the question that surprises people most. Italian copyright law (L. 633/1941, art. 12-bis) says that, unless agreed otherwise, the employer holds the economic exploitation rights in software created by an employee in the course of their duties or on the employer's instructions. Some legal commentators argue the rule can extend to other working relationships.
The problem is that many founders are not employees of their startup. They are shareholders, sometimes directors, and they wrote the code before incorporation or without any contract. In those cases the starting point is that rights arise with the author. If there is no written assignment to the company, the cofounder may still own part of the code, and the law requires a transfer of exploitation rights to be proven in writing (art. 110, L. 633/1941).
In practice:
- work out who wrote what (the repository history helps);
- dig out any contracts, engagement letters or collaboration agreements;
- if there are none, have the departing cofounder sign an assignment of their rights in the code to the company, ideally as part of the exit agreement;
- make sure the company controls the critical accounts: repositories, cloud, domains, app stores, production credentials.
Without a clear chain of rights, selling the company, bringing in an investor or relaunching with a new team becomes much harder, because anyone doing due diligence will ask about this first.
Customers and contracts
Customer contracts are signed by the company, not by the founder, so if they leave the contracts stay with the company. The real risk is different: that the personal relationship leaves with them. So it is worth checking:
- whether there are non-compete or non-solicitation commitments (for customers and staff) in the shareholders' agreement or elsewhere, and whether they are valid;
- if the cofounder was a director, that they hand back documents, access and information, and that their resignation is formalised;
- which customers depend on them and how to manage the handover.
If a relaunch involves moving the business to a new company, remember that assigning a single contract normally requires the other party's consent (art. 1406 Civil Code). When a whole business is transferred, by contrast, the buyer takes over non-personal contracts unless agreed otherwise, but the other party can terminate within three months if there is just cause (art. 2558 Civil Code).
Restarting with a new team or partner
Once shares, code and contracts are sorted, the startup can restart. The usual steps are:
- An exit agreement with the cofounder: price and terms for transferring their shares (or keeping them with reduced rights), assignment of rights in the code, any non-compete, and the handover.
- A new cap table: who stays, who joins, with what stakes and which leaver and vesting clauses.
- Bringing in the new team or operating partner, with written roles and goals.
- Clear, timely communication to investors and customers.
PATAVIUM Restart
When a cofounder leaves and the project risks grinding to a halt, PATAVIUM Restart reviews the situation confidentially and, when the conditions are right, joins as an operating cofounder in exchange for equity, helping to put shares, code and team back in order. See how it works at patavium.tech/en/startup-restart, or write to us confidentially from the contact page.
Sources
- Italian Civil Code, art. 2469 (transfer of shares), art. 2473-bis (exclusion of a shareholder), art. 1406 (assignment of contracts), art. 2558 (contracts in a business transfer) – Brocardi.it
- Law 633/1941, art. 12-bis (software created by employees) and art. 110 (written proof of transfer) – Brocardi.it
- DL 179/2012, art. 26 (company law exemptions for innovative startups and SMEs) – Normattiva
- EC News, Grandi novità per le società a responsabilità limitata PMI (summary of Italian National Council of Notaries Study no. 101-2018/I)