This article posted to our partner site Mondaq.com illustrates the importance of ensuring that vesting provisions do not create a conflict of interest.
Vesting provisions can be used by investors to ensure that founders remain committed to the company and do not simply cash out as soon as the investor’s money increases the company’s valuation.
Implemented improperly, as it was in the court case discussed in this article, vesting provisions can incentivize the very behaviour they seek to prevent and make selling the company more profitable than not selling.