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Ask HN: Why some startup equity agreements have “repurchase on divorce” clause?

1 points by kumar785 ↗ HN
I've noticed that some startup founders equity agreements have introduced a "repurchase right on divorce" clause that allows the company to repurchase shares of the company stock upon involuntary transfer of the stock from a founder. For example, if the founder`s spouse owns equity as a part of common property and there is divorce, shares could be repurchased from founder`s spouse. That is shitty, in my opinion. What is the main reason behind that clause? Is it a must-have, or VCs don't really care?

2 comments

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blakdawg
A former spouse of a founder may have different (or even opposing) interests versus those of the company. A dissident shareholder might be able to block or delay important corporate actions; would be entitled to information not otherwise available to the public or without an NDA; and might seek to sell their shares to someone even more hostile to the company, and/or at a price or on terms that disrupt further financing rounds for the company.
kumar785
Thank you. Is it a must-have, or VCs don't really care?