Founders' shares in a GmbH can be subject to vesting which, however, would need to be agreed contractually (so called "vesting agreement"). In general, there is an expectation among investors that founders of a German startup subject their shares to vesting so that the founders forfeit shares if they leave the company "early". The same argumentation may, however, also be applicable between the founders (even before the onboarding of the first external investors). The implementation of a vesting scheme helps to ensure that founders remain committed to the company for a certain period and align the interests of all founders and stakeholders by ensuring that each founder earns its equity through continued contribution to the startup.
When founders' shares are subject to vesting, they regularly are subject to "reverse vesting" as the founder will remain the registered (legal) holder of the shares and enjoy all benefits of being a shareholder (including exercising full voting rights). However, the shares may be subject to a call option (i.e., forfeiture) in accordance with the terms and conditions established in the underlying vesting agreement.
A typical vesting schedule in German market context would provide for a vesting period of four years with a twelve-months cliff, meaning that no shares vest during the first year (so called "cliff period"), but on the first anniversary of the vesting commencement date, a quarter of the shares is deemed vested. The remaining shares then vest monthly or quarterly over the next three years. However, depending on the specific circumstances and agreements among the founders and other stakeholders, vesting schedules can be customized in the individual case. For example, some might opt for a three-year vesting period or include performance-based milestones.
With regard to the vesting commencement date, some investors may allow the founders to establish a vesting commencement date based on when the founder began providing significant services to the company so that he or she can get credit for time already served. Alternatively, some investors may require the shares to "revest" with effect from the date of closing of the investment. As the startup becomes more mature, we would expect the proportion of founders' shares that is required to revest after a financing round to be reduced (as these shift from being "sweet shares" to "sweat shares")
Upon a founder's departure, the consequences on their shareholding will depend on the categorization of the departing founder as either (typically) a "Good Leaver" or a "Bad Leaver"; in some instances the parties decide to even introduce a third category, the "Grey Leaver". Although the definitions of these categories are often subject to negotiation, bad leaver events typically include fraud, gross misconduct and similar bad faith actions, in turn, a good leaver typically defined as a departure in any other circumstances, e.g., also including the case of a so-called voluntary leaver, i.e., a founder leaving the company without cause "on good terms". We sometimes see this case as being considered as grey leaver, whereas such grey leaver events are more likely to be connected to certain time frames (for example being less strict in the second half of the vesting period).