Termination provisions governing founder equity are among the most negotiated terms in Indian venture capital transactions. To ground these negotiations in data, we analysed over 100 Indian private limited companies that raised institutional venture capital in 2025, examining how deals allocate rights over founder shares upon various termination scenarios.

This article presents our key findings and is a reproduction of our newsletter. A full report is available on request at admin@boolean.legal.

Key Findings at a Glance

• 75.9% of deals impose full forfeiture of both vested and unvested shares at face value or cost upon a Cause termination.
• around 14.8% of the deals are silent on the severity of the crime that constitute Cause, and only 12.0% require an actual conviction.
• 15.7% of deals define any breach of the shareholders' agreement as Cause, without a materiality qualifier.
• Only 2.8% of companies allow founders to retain vested shares following a Cause termination, compared to 45.4% on a No-Cause exit.
• For unvested shares, face-value pricing is broadly consistent across all termination scenarios; for vested shares, the Cause/No-Cause characterisation is decisive.

What Actually Triggers "Cause"?

The definition of "Cause" is the single most critical threshold in these provisions, given the prevalence of full forfeiture:

• The "core trio" of triggers (Fraud (85.2%), Gross Negligence (84.3%), and Wilful Misconduct (83.3%)) are effectively market standard and appear in over four-fifths of deals.
• 15.7% of deals treat any breach of the shareholders' agreement as Cause, without a materiality qualifier. Whether this breadth is appropriate depends on the specific transaction context, but it is a provision both parties should engage with deliberately rather than accept as boilerplate.

The Face Value Penalty

Once the Cause threshold is crossed, the economic treatment of the departing founder's shares becomes the operative question. Our data reveals significant variation depending on the termination scenario.

• Treating face value and at-cost pricing as economically equivalent, 75.9% of companies force vested-share buybacks at this nominal value upon a Cause termination.
• For unvested shares, the nominal pricing penalty jumps to 89.8% in Cause scenarios.
• Conversely, when founders are bought out on a No-Cause exit, Fair Market Value (FMV) is the dominant pricing basis for vested shares.

The Retention Chasm: Cause vs. No-Cause

The most significant economic consequence of the Cause/No-Cause distinction is visible in the retention data.

• Only a tiny fraction (2.8% of companies) allow a founder to retain their vested shares following a Cause termination.
• In sharp contrast, 45.4% allow founders to retain vested shares upon a No-Cause termination.
• Approximately 42-percentage-point gap (a 16.2x differential) means a founder's ability to walk away with their vested equity is dictated almost entirely by which side of the Cause line they land on.

The Real Dividing Line: Vested vs Unvested

A notable pattern emerges when the data is segmented by vesting status: the treatment of unvested shares is relatively consistent across termination scenarios, while the treatment of vested shares diverges sharply depending on the nature of the exit.

• Face value/at-cost pricing for unvested shares is remarkably consistent across all scenarios: 89.8% on Cause, 61.1% on No-Cause, and 65.7% on Good Leaver exits.
• For vested shares, pricing diverges sharply by scenario: 75.9% at face value on Cause, but only 0.9% on No-Cause and Good Leaver exits, where FMV dominates.
• In other words, the "earned vs unearned" distinction matters more than the termination scenario for unvested shares; on the other hand, for vested shares, the Cause line is everything.

Strategic Takeaways for Deal Negotiations

The data reveals several areas where current market practice may warrant closer attention from both investors and founders. We frame these not as critiques of existing practice, but as areas where deliberate, informed negotiation is likely to produce more durable and balanced outcomes than reliance on precedent templates.

A. Materiality and Breach Scope
15.7% of deals still treat "any breach" of the shareholders' agreement as a sufficient trigger for Cause. An overly broad Cause definition invites challenges to justify the "Nuclear Option"; on the other hand, an overly narrow one may leave genuine misconduct unaddressed. Both sides benefit from clarity.

B. Cause Determination Process
Only 35.2% of companies route determination of certain categories of Cause to a neutral adjudicator; an independent determination mechanism serves both sides. The 19.4% of deals that are silent on the determination mechanism create ambiguity that neither party is well-served by, and which costs little to resolve at the drafting stage.

C. Retain Rights on Vested Shares
The significant disparity between Cause (2.8% retention) and No-Cause (45.4% retention) outcomes for vested shares reflects the market's view of Cause termination as carrying meaningful economic consequences. Parties may wish to consider whether the current binary (i.e. near-total forfeiture on Cause vs. significant retention on No-Cause) adequately addresses the full spectrum of termination circumstances, or whether more graduated approaches may better serve both sides' interests in specific deal contexts. Where a call option for vested shares is present for No-Cause exits, parties should consider benchmarking it to FMV pricing (including a discount on FMV), which is evidently the market norm for non-fault exits.

Interested in reading the full breakdown? Email us at admin@boolean.legal to get access to our full report.

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