One of the most difficult questions that startup founders eventually face is what happens when one of the founders decides to leave the company.

A startup may initially be established by two or three people who trust each other completely. Each founder may receive a significant percentage of the company because everyone expects to work together for many years. However, startup relationships do not always develop as planned.

A founder may receive another job offer. A disagreement may arise between the founders. One founder may stop contributing to the business. Another may establish a competing company. The startup may receive investment and the relationship between the original founders may deteriorate. In some cases, a founder may resign from management but still want to remain a shareholder.

This creates an important legal question:

What happens to a founder’s shares when that founder leaves a startup in Turkey?

The short answer is that leaving the startup does not automatically mean losing the shares.

Under Turkish law, working for the company, managing the company and owning shares in the company are legally different relationships. A founder may resign as an employee, cease providing services, resign as a manager or board member and still continue to own shares.

Whether the departing founder must transfer some or all of those shares depends on several factors, including:

• whether the startup is a limited liability company or joint stock company,
• the articles of association,
• the shareholders’ agreement,
• any founders’ agreement,
• vesting provisions,
• good leaver and bad leaver clauses,
• call options or repurchase rights,
• share transfer restrictions,
• and the circumstances surrounding the founder’s departure.

For this reason, founder exit provisions should ideally be negotiated before a dispute occurs.

Does a Founder Automatically Lose Their Shares When They Leave the Company?

No.

This is one of the most important principles for startup founders to understand.

Suppose a startup has two founders:

• Founder A owns 50%.
• Founder B owns 50%.

Both founders initially work full-time.

After one year, Founder B decides to stop working for the startup.

Unless there is a contractual or statutory mechanism requiring Founder B to transfer the shares, Founder B does not automatically lose the 50% ownership simply because he or she no longer works for the company.

This distinction frequently surprises startup founders.

The remaining founder may reasonably say:

“I have been working on this company alone for the last three years. Why should someone who left after one year still own half of the business?”

From a commercial perspective, the frustration is understandable.

From a legal perspective, however, shares are property rights. They do not normally disappear merely because a shareholder stops providing services.

This is exactly why startup founders should consider vesting and founder departure provisions at the beginning of their relationship.

Founder, Employee, Manager and Shareholder Are Different Legal Positions

A person involved in a startup may simultaneously have several legal capacities.

For example, a founder may be:

• a shareholder,
• an employee,
• a manager of a limited liability company,
• a board member of a joint stock company,
• a chief executive officer,
• an independent contractor,
• and an intellectual property owner.

Termination of one of these relationships does not necessarily terminate the others.

For example, resignation from the board of directors does not automatically transfer the founder’s shares.

Likewise, termination of an employment agreement does not automatically terminate share ownership.

This distinction should be clearly reflected in startup documentation.

A shareholders’ agreement should therefore answer two separate questions:

1. Under what circumstances does the founder stop working for the startup?
2. What happens to the founder’s shares after that relationship ends?

Without this distinction, serious disputes can arise.

Why Is Founder Departure Particularly Dangerous for Startups?

Founder departure is more complicated in startups than in ordinary companies because a significant portion of startup value is usually created through future work.

Imagine that three founders establish a technology company.

Each founder receives 33.33%.

At incorporation, the company has almost no value.

The equity distribution is based on the expectation that all three founders will work for the next four or five years.

One founder leaves after three months.

The other two founders continue working for five years.

The startup later becomes worth EUR 10 million.

The founder who worked for only three months may theoretically still own approximately one-third of the company if the parties never created an effective mechanism dealing with founder departure.

This is sometimes referred to as dead equity.

Dead equity can become a major problem during investment rounds because investors generally want the people who actively create value to hold meaningful equity.

A former founder owning 20%, 30% or 40% of a company without contributing to the business can make the startup significantly less attractive to investors.

What Is Founder Vesting?

Founder vesting is one of the most widely used mechanisms for preventing dead equity.

The basic idea is simple:

A founder does not receive the full economic benefit of the agreed equity immediately. Instead, the founder earns or secures that economic entitlement progressively by continuing to contribute to the startup over a specified period.

A common international startup structure is:

Four-year vesting with a one-year cliff.

Under a simplified commercial example, assume that Founder A is allocated 24% of the startup subject to a four-year vesting arrangement.

After one year, 25% of the agreed founder allocation becomes vested.

The remainder may then vest monthly or quarterly over the following three years.

If Founder A leaves after six months, the founder may have no vested entitlement under a one-year cliff arrangement.

If Founder A leaves after two years, approximately half may be treated as vested.

The precise legal mechanism, however, is extremely important.

Is Vesting Recognised Under Turkish Law?

Vesting is widely used in international startup transactions, but Turkish startup documents should not simply copy a Silicon Valley or Delaware vesting template.

Turkish corporate law does not necessarily treat founder shares as automatically disappearing merely because a contractual vesting period has not been completed.

The arrangement may therefore need to be implemented through legally appropriate mechanisms, such as:

• contractual share transfer obligations,
• call options,
• repurchase arrangements,
• conditional transfer undertakings,
• shareholder obligations,
• or other mechanisms compatible with the Turkish Commercial Code and Turkish Code of Obligations.

The implementation also differs depending on whether the startup is structured as a limited liability company or joint stock company.

For this reason, stating only that “the shares vest over four years” may not be enough.

The agreement should also explain what legally happens to the unvested shares when the founder leaves.

What Are Vested Shares and Unvested Shares?

The distinction between vested and unvested equity is central to founder exit arrangements.

Vested shares generally represent the portion that the founder is entitled to retain after satisfying the agreed service or participation requirements.

Unvested shares represent the portion that may be required to be transferred if the founder leaves before completing the agreed period.

For example:

Founder A receives an economic allocation of 20% subject to four-year vesting.

Founder A leaves after two years.

Depending on the contract, 10% may be treated as vested and 10% as unvested.

The agreement may provide that the vested portion remains with Founder A, while the unvested portion must be transferred to:

• another founder,
• existing shareholders,
• a designated investor,
• a third party,
• or, where legally permissible and subject to statutory limitations, the company itself.

The transfer price must also be clearly addressed.

Can Unvested Shares Be Bought Back for Nominal Value?

Startup contracts sometimes provide that unvested shares may be acquired at the lower of:

• nominal value,
• original acquisition price,
• or another predetermined amount.

This type of arrangement can be commercially important because unvested equity is generally intended to reward future contribution rather than provide a departing founder with the entire future value of the company.

However, the mechanism must be drafted carefully under Turkish law.

The parties should determine:

• who has the right to acquire the shares,
• when the right arises,
• how the option is exercised,
• the purchase price,
• the payment period,
• the transfer documentation,
• and what happens if the departing founder refuses to cooperate.

A general statement such as “unvested shares return to the company” may be legally insufficient and may also conflict with statutory rules restricting a company’s acquisition of its own shares.

Can the Startup Company Buy the Departing Founder’s Shares?

Sometimes, but not without limitations.

Turkish company law imposes restrictions on companies acquiring their own shares.

For joint stock companies, Article 379 of the Turkish Commercial Code establishes the general framework for acquisition of a company’s own shares and, among other requirements, generally limits such acquisitions to one-tenth of the share capital, subject to statutory conditions and exceptions.

Limited liability companies are subject to a separate rule. Under Article 612 of the Turkish Commercial Code, a limited liability company may generally acquire its own capital shares if it has sufficient freely disposable equity and the nominal value of the shares does not exceed 10% of the share capital. Where the acquisition results from an exit or exclusion contemplated in the articles of association or ordered by a court, the threshold may rise to 20%, with additional rules applying to shares exceeding 10%.

Therefore, startup agreements should not automatically assume that the company can repurchase any percentage of a departing founder’s shares.

If a founder owns 40% of the startup, for example, a clause simply saying “the company shall repurchase all shares” may face corporate law limitations.

An alternative structure may be required.

Good Leaver and Bad Leaver Clauses

Founder exit provisions frequently distinguish between a good leaver and a bad leaver.

The reason is straightforward: not every departure should produce the same economic consequence.

Suppose Founder A leaves because the founders mutually agree that the role is no longer required.

Founder B, by contrast, secretly copies the startup’s source code, approaches its customers and launches a competing business.

It may be commercially unreasonable to treat both departures identically.

What Is a Good Leaver?

A good leaver is generally a founder whose departure occurs under circumstances considered legitimate under the shareholders’ agreement.

The definition depends entirely on the contract.

Possible examples may include:

• termination by mutual agreement,
• termination without serious fault,
• removal from an executive position without cause,
• circumstances preventing continued participation,
• or other events specifically agreed between the founders and investors.

A good leaver may be entitled to retain vested shares and may sometimes receive fair market value for shares subject to transfer.

What Is a Bad Leaver?

A bad leaver is generally a founder whose departure results from serious contractual misconduct.

Depending on the agreement, examples may include:

• fraud,
• theft or misuse of company assets,
• serious breach of confidentiality,
• intellectual property misappropriation,
• unauthorised competition,
• deliberate damage to the company,
• serious breach of the shareholders’ agreement,
• or abandonment of founder responsibilities.

Bad leaver provisions may permit other shareholders to acquire a broader portion of the departing founder’s equity, sometimes at a lower contractual price.

However, aggressive bad leaver provisions should be carefully reviewed under Turkish law, particularly in relation to contractual penalties, proportionality and mandatory corporate rules.

What If There Is No Vesting Agreement?

This is one of the most problematic scenarios.

Suppose two founders each own 50%.

There is no shareholders’ agreement.

There is no vesting clause.

There is no call option.

There is no contractual obligation requiring share transfer on departure.

One founder leaves.

In principle, the remaining founder cannot simply declare:

“You no longer work here, therefore your shares belong to me.”

The departing founder may continue to hold the shares and exercise the rights attached to them.

Depending on the company type and corporate structure, these rights may include:

• voting rights,
• dividend rights,
• information rights,
• participation in general meetings,
• pre-emption rights,
• and entitlement to proceeds if the company is eventually sold.

This may create an extremely difficult situation.

The remaining founder may perform almost all future work while the former founder continues benefiting economically from the increase in company value.

Can the Remaining Founders Dilute the Departing Founder?

Founders sometimes assume that a departing shareholder can simply be diluted to almost zero by issuing new shares.

This should not be treated as an automatic solution.

Capital increases must comply with Turkish corporate law, the articles of association and shareholder rights.

In joint stock companies, Article 461 of the Turkish Commercial Code gives shareholders a pre-emptive right to subscribe for newly issued shares in proportion to their existing ownership. Restriction or removal of that right is subject to statutory conditions and cannot be used to unjustifiably benefit or disadvantage a person.

Therefore, a capital increase should not be used merely as a disguised mechanism to confiscate or economically destroy a departing founder’s interest.

A genuine financing round may naturally dilute shareholders who do not participate, but deliberate abusive dilution can create significant corporate disputes.

Founder Departure in a Turkish Limited Liability Company

Limited liability companies require particular attention because Turkish law contains specific rules concerning share transfers, exit and exclusion.

A limited liability company shareholder may leave the company through several possible mechanisms.

The simplest is a voluntary transfer of the shareholder’s capital interest to another shareholder or third party.

Under Article 595 of the Turkish Commercial Code, the transfer of a limited liability company capital share and transactions creating the obligation to transfer must be made in writing and the signatures must be notarised. Unless otherwise provided in the articles of association, approval of the general assembly is required and the transfer becomes effective with that approval.

This means that a departing founder cannot always transfer a limited liability company interest as freely as shares in a joint stock company.

The articles of association should therefore be carefully examined.

Can a Limited Liability Company Founder Legally Exit the Company?

Yes.

Turkish law provides statutory mechanisms for withdrawal from a limited liability company.

Under Article 638 of the Turkish Commercial Code, the articles of association may grant shareholders a right to withdraw and may make that right subject to specified conditions.

In addition, a shareholder may seek a court decision permitting withdrawal where just cause exists.

Therefore, a founder trapped in a serious shareholder dispute may potentially have a legal route to leave the company even where a voluntary share sale cannot be agreed.

However, the existence of just cause depends on the circumstances of each case.

Ordinary disagreement between founders will not necessarily justify judicial withdrawal.

The court will evaluate whether continuation of the shareholder relationship has become legally unreasonable in the specific circumstances.

Can a Founder Be Expelled From a Limited Liability Company?

Under Article 640 of the Turkish Commercial Code, the articles of association may specify circumstances under which a shareholder may be expelled by general assembly resolution.

The law also preserves the possibility of the company seeking judicial expulsion of a shareholder for just cause.

A shareholder expelled under an articles-based mechanism may challenge the relevant resolution within the statutory period.

This makes limited liability company drafting particularly important.

If founders want certain serious events to constitute grounds for exclusion, these matters should be considered at the incorporation stage rather than only after a dispute develops.

What Does the Departing Limited Company Founder Receive?

Where a shareholder legally withdraws or is excluded from a limited liability company under the statutory regime, Article 641 provides an important rule.

The departing shareholder is generally entitled to a withdrawal payment corresponding to the real value of the capital interest. The articles of association may regulate the withdrawal payment differently in connection with a contractual withdrawal right, subject to the applicable legal framework.

Therefore, exclusion from a limited liability company should not automatically be understood as confiscation of the shareholder’s investment.

The valuation of the departing founder’s interest may become one of the central issues in litigation.

Questions may arise regarding:

• company valuation,
• assets,
• liabilities,
• intellectual property,
• customer contracts,
• future revenue,
• goodwill,
• investment rounds,
• and the relevant valuation date.

In high-growth startups, this can become significantly more complicated than valuing a traditional company.

Founder Departure in a Turkish Joint Stock Company

The legal position is different in a joint stock company.

Shares in a joint stock company are, in principle, transferable unless the law or articles of association impose permitted restrictions.

Article 490 of the Turkish Commercial Code establishes the general principle that registered shares may be transferred without restriction unless otherwise provided by law or the articles. Articles 491 to 493 regulate statutory and articles-based restrictions on certain transfers.

Therefore, a departing founder in an A.Ş. will frequently exit by transferring shares pursuant to:

• a negotiated share sale,
• a founders’ agreement,
• a shareholders’ agreement,
• a call option,
• a drag-along transaction,
• a company sale,
• or another contractually established exit mechanism.

Is There an Automatic Right to Leave an A.Ş. and Demand the Share Price?

Not in the same general form applicable to limited liability companies.

This distinction is critical.

A founder of an anonymous company cannot simply assume that because the relationship with other founders has deteriorated, the company must automatically purchase the founder’s shares.

The Turkish Commercial Code does contain specific minority protection mechanisms.

Under Article 531, shareholders representing at least 10% of the capital of a non-public joint stock company may, where just cause exists, seek dissolution of the company. Instead of dissolution, the court may order payment of the real value of the claimant shareholders’ shares and their removal from the company or may adopt another appropriate solution.

However, this mechanism should not be confused with an unrestricted statutory right for any joint stock company shareholder to resign at any time and demand payment.

Indeed, recent Court of Cassation practice has emphasised the absence of a general direct expulsion mechanism in joint stock companies comparable to the limited liability company regime.

For startup A.Ş. structures, contractual exit provisions are therefore particularly important.

Can a Departing Founder Sell Shares to a Competitor?

Potentially, depending on the company structure and applicable restrictions.

This is one of the reasons startup articles and shareholder agreements should regulate transfers carefully.

Without appropriate restrictions, the remaining founders may discover that the departing founder intends to sell a significant stake to:

• a competitor,
• an unwanted investor,
• a former employee,
• or another person whose participation could harm the startup.

Possible protections may include:

• rights of first refusal,
• pre-emption rights,
• restrictions on transfers to competitors,
• permitted transfer provisions,
• lock-up periods,
• board or company approval mechanisms where legally available,
• and contractual call options.

For non-listed registered shares in a joint stock company, Article 493 also permits certain restrictions where the articles contain legally recognised important reasons or where the company makes an offer based on the real value of the shares in the circumstances contemplated by the law.

What Is a Founder Call Option?

A call option gives a specified person the contractual right to acquire shares when defined circumstances occur.

For startup founders, a call option may become exercisable when:

• a founder resigns,
• a founder is terminated,
• a founder becomes a bad leaver,
• vesting conditions are not satisfied,
• confidentiality obligations are breached,
• a founder competes with the startup,
• or another specified event occurs.

The agreement should clearly regulate the option.

It should specify:

• the trigger event,
• who may exercise the option,
• which shares are affected,
• the price,
• how the price is calculated,
• when payment must be made,
• when ownership transfers,
• and what happens if the departing founder refuses to sign the required documents.

This is particularly important because a contractual promise without an effective enforcement structure may be insufficient when relations between founders have already collapsed.

How Should the Departing Founder’s Shares Be Valued?

Valuation can become the most contentious aspect of founder departure.

Possible valuation methods include:

• nominal value,
• original subscription price,
• fair market value,
• most recent investment round valuation,
• independent expert valuation,
• EBITDA multiples,
• revenue multiples,
• discounted cash flow,
• or a contractually agreed formula.

Different methods may be used for vested and unvested shares.

For example, the agreement may provide:

• unvested shares: original acquisition price,
• vested shares of a good leaver: fair market value,
• vested shares of a bad leaver: a contractually defined discounted amount.

The commercial logic must be translated into a legally enforceable mechanism.

The agreement should also explain who determines fair market value if the parties disagree.

Otherwise, the founders may end up litigating about valuation for years.

What Happens to Intellectual Property When a Founder Leaves?

Founder departure should never be analysed only as a shareholding problem.

For technology startups, intellectual property may be more important than the shares themselves.

A departing founder may have developed:

• source code,
• software architecture,
• algorithms,
• AI models,
• trademarks,
• databases,
• product designs,
• technical documentation,
• customer information,
• or trade secrets.

If those rights were never properly assigned to the company, the departing founder may claim ownership.

This can seriously threaten the business.

A startup should therefore ensure from the beginning that relevant intellectual property is properly transferred or licensed to the company through appropriate agreements.

The founder exit agreement should also require:

• return of company devices,
• return or deletion of confidential information,
• transfer of passwords and access credentials,
• delivery of source code,
• removal of access to internal systems,
• and continuing confidentiality obligations.

What If the Departing Founder Starts a Competing Startup?

Competition is another common source of conflict.

The shareholders’ agreement may contain non-compete and non-solicitation obligations intended to prevent a founder from leaving and immediately using the startup’s confidential information, employees or customer relationships to establish a competitor.

However, non-compete provisions should not be drafted without limitation.

Their enforceability may depend on factors including:

• duration,
• geographic scope,
• type of restricted activity,
• proportionality,
• the founder’s role,
• and the legitimate interests being protected.

The startup should distinguish between legitimately protecting confidential information and attempting to prevent a former founder from working in an entire industry indefinitely.

Can a Founder Keep Shares but Lose Voting Rights?

Not automatically.

A founder who leaves operational management but remains a shareholder generally continues to have the rights associated with the shares unless a valid legal mechanism provides otherwise.

This means that the founder may potentially continue voting on corporate matters.

For example, a former founder holding 40% could still materially influence:

• capital increases,
• amendments to the articles,
• major corporate transactions,
• board elections,
• company sales,
• or investment rounds.

For this reason, founder departure can create governance problems even if the departing founder never returns to the office.

The issue should be addressed before the departure is completed.

How Does Founder Departure Affect Future Investment?

Investors examine founder ownership very carefully.

During due diligence, an investor may ask:

• Why does a former founder still own 25%?
• Is that founder subject to vesting?
• Can the company recover unvested shares?
• Does the former founder have veto rights?
• Can that founder block the investment?
• Is the founder still bound by confidentiality?
• Who owns the intellectual property developed by that founder?
• Can the founder sell shares to a competitor?

If these questions cannot be answered clearly, an investor may demand restructuring before completing the financing round.

In serious cases, dead equity may reduce the valuation or cause the investor to abandon the transaction.

Example: Founder Leaves Without a Shareholders’ Agreement

Consider the following example.

Founder A and Founder B establish a software startup in Turkey as a joint stock company.

Each receives 50%.

There is no shareholders’ agreement.

There is no vesting.

After eight months, Founder B leaves.

Founder A continues running the company for four years.

The company is later valued at EUR 8 million.

Founder B may still own 50% unless a later transaction or legal mechanism changes that ownership.

Founder A cannot simply cancel Founder B’s shares because Founder B no longer works for the startup.

This is an extremely expensive problem that could potentially have been prevented through proper founder documentation at incorporation.

Example: Founder Leaves Under a Vesting Arrangement

Now consider a different structure.

Founder A and Founder B each receive 50% economic participation, subject to four-year founder vesting.

The documents contain an appropriately structured call option for unvested equity.

Founder B leaves after one year.

Under the contractual structure, a defined portion is vested and a larger portion remains subject to the call option.

The unvested portion can therefore be dealt with according to the agreed contractual mechanism.

The cap table becomes cleaner.

Future investors can see that founder equity reflects actual long-term contribution.

This is one reason vesting has become a standard issue in professional startup investment negotiations.

What Should a Founder Exit Agreement Include?

When a founder actually leaves a startup, the parties should generally consider signing a comprehensive founder exit or settlement agreement.

Depending on the circumstances, the document may address:

• resignation from employment,
• resignation as manager or board member,
• treatment of vested shares,
• transfer of unvested shares,
• purchase price,
• payment schedule,
• release of claims,
• intellectual property,
• confidentiality,
• non-compete obligations,
• non-solicitation,
• company property,
• data and passwords,
• representations and warranties,
• future cooperation,
• public announcements,
• dispute resolution,
• and tax consequences.

The exit should be treated as a corporate transaction rather than merely a resignation letter.

The Most Important Rule: Plan the Founder Exit Before Anyone Wants to Leave

The best time to negotiate founder departure rules is not when a founder announces resignation.

At that stage, the parties’ interests may already be completely opposed.

The best time is usually when the startup is established and its economic value is still relatively low.

At the beginning, the founders can objectively discuss questions such as:

• What if one of us leaves after six months?
• What if someone stops working?
• What if someone breaches confidentiality?
• What if a founder wants another job?
• What if an investor demands founder vesting?
• What happens to unvested shares?
• How will vested shares be valued?
• Can a departing founder sell to anyone?
• What happens if the company cannot purchase the shares?
• What happens if the founder refuses to transfer?

Answering these questions early can prevent major shareholder disputes later.

Conclusion: What Happens to a Founder’s Shares When They Leave a Startup?

Under Turkish startup law, a founder does not automatically lose shares simply because the founder leaves the business.

Share ownership, employment, management and founder responsibilities are separate legal relationships.

A founder may stop working, resign as CEO or leave the board and still remain a shareholder unless there is a legally effective mechanism changing the ownership of the shares.

The outcome therefore depends heavily on the startup’s corporate and contractual structure.

In a limited liability company, Turkish law provides specific mechanisms concerning share transfers, withdrawal, exclusion and withdrawal payments.

In a joint stock company, shares are generally transferable within the statutory framework, but there is no equivalent general mechanism allowing any founder simply to resign and automatically receive the value of the shares. Contractual founder exit mechanisms are therefore especially important.

For startups, the most effective tools usually include properly structured:

• founder vesting,
• good leaver and bad leaver provisions,
• call options,
• share transfer obligations,
• rights of first refusal,
• transfer restrictions,
• intellectual property assignments,
• confidentiality provisions,
• and valuation mechanisms.

The central principle is simple:

Equity should reflect the relationship the founders actually intend to create.

If founders intend someone to receive 30% because that person will work for the company for four years, the legal documents should address what happens if that person leaves after four months.

Otherwise, a founder who contributes very little may continue to own a substantial part of a successful startup for many years.

This can lead to founder disputes, dead equity, blocked investment rounds and difficulties during an eventual company sale.

For this reason, founders establishing or investing in a startup in Turkey should not treat founder departure clauses as theoretical provisions that will never be used. A properly drafted founder exit structure can become one of the most valuable protections in the entire shareholders’ agreement.