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Transcript

E05 — Legal Aspects of CEO Succession with Gretchen Lennon

No CEO succession happens without lawyers involved, even if the departure is amicable. We discuss legal things that CEOs considering stepping down should know.

One of the lessons I learned as a founder and CEO of Makers was to get good legal advice. It’s far preferable to prevent problems from arising by consulting with lawyers early than to fix them later: you’ll be speaking to the same lawyers, except it’ll be more difficult and more expensive.

Yet, many founder CEOs who stepped down don’t seem to take legal aspects of this transition seriously enough. In this conversation, Gretchen Lennon from Lennon Legal and I discuss the main points that all founders considering leaving their startup should be aware of.

There are two overarching points I hope founders will take from this conversation.

One is that your board is on your side only as long as you’re the CEO. When you start negotiating stepping down, they will be on the opposite side of the table, negotiating for the company. To some founders, this comes as a surprise because the investors have always been in their corner. It’s not wrong and it’s not personal: it’s just a change of roles that founders should expect.

The other one is that there’s more complexity than many founders expect before the start thinking it through: shares, options, tax, restrictive covenants, consent rights, settlement agreement, etc. etc. Founders need to understand their legal position before starting the negotiation with the board because this will shape their negotiation strategy.

(If there’s a founder who needs to watch this episode, send them the link!)

Timestamps

(Chapters are clickable on YouTube)

00:00 Introduction

02:31 Hypothetical CEO Resignation

05:06 Unfair Dismissal

08:12 Shares,  Options and Taxes

16:36 Getting Legal and Tax Advice

18:37 Negotiating Settlement Agreements

21:59 Post-Termination Restrictions

26:42 Staying with the Business as an ex-CEO

32:16 Rebalancing the Cap Table

37:21 Anti-embarrassment Provisions

40:18 Renegotiating the SHA and the Articles

42:58 The Reasons to Start Preparing Early

47:15 LennonLegal.com

48:03 Final Thoughts and Key Takeaways

Discussion about this podcast

Unconditionally Human
Startup CEO Succession
Real stories from founder CEOs who stepped down, professional CEOs who took over from them and VCs who saw the process from the inside.