Two startup founders died suddenly this month.
Amit Banerji (Sirona Hygiene) and Rohan Mirchandani (Epigamia). Both in their 40s. Both with thriving companies. Both leaving behind a legal vacuum.
Because most startup agreements don't say what happens when a founder dies.
Questions Your Docs Don't Answer
What happens to founder shares?
Do they go to your spouse? Your estate? Are they subject to vesting acceleration? Can the company force a buyback?Who has operational control?
If you're CEO and die suddenly, who has legal authority to run the company tomorrow?What about board seats?
If you hold a board seat personally (not as CEO), does it transfer? Expire? Get reappointed?What if you're a solo founder?
Congrats, your startup is now a rudderless ship with no executive leadership and a ticking runway clock.Do your investors even know?
Have you TOLD your lead investor what happens if you get hit by a bus?
Most founders have thought about none of this.
What Your Docs Probably Cover
Typical Founder/Shareholder Agreement addresses:
- ✅ Equity splits
- ✅ Vesting schedules
- ✅ IP assignment
- ✅ Non-competes
- ❌ Death
Typical Operating Agreement addresses:
- ✅ Board composition
- ✅ Voting thresholds
- ✅ Protective provisions
- ❌ Sudden founder loss
Typical Bylaws address:
- ✅ Director removal
- ✅ Officer appointments
- ✅ Meeting requirements
- ❌ Immediate continuity
Your estate plan probably addresses:
- ✅ Who gets your house
- ✅ Who gets your bank accounts
- ✅ Guardianship for your kids
- ❌ Who runs your startup
See the problem?
What Happens By Default (Spoiler: It's Bad)
If your docs are silent, here's what happens under most state laws:
Your shares: Pass to your estate (spouse, kids, whoever's in your will)
Your board seat: Probably expires (depends on bylaws)
Your CEO role: Automatically terminated (death ends employment)
Who runs the company: ??? (nobody, until the board appoints someone)
Your equity vesting: Depends on your agreement (probably stops immediately)
Your spouse's involvement: They now own your shares but have no operational control and no idea what the company does
Investor reaction: Panic
Real-World Example: What Happened in India
When Amit Banerji and Rohan Mirchandani died, their companies faced:
- No clear operational successor (Who's CEO now? Who makes decisions?)
- Equity ownership chaos (Do spouses inherit? Are shares still subject to vesting? Can investors force a buyback?)
- Board scrambling (Emergency meetings to appoint interim leadership)
- Legal vacuum (Indian startup law has NO framework for this)
Their companies will survive (both have strong teams), but it's messy. And expensive. And entirely preventable.
What You Actually Need
1. Founder Succession Clause in Your SHA
Add language like:
"In the event of a Founder's death, the following shall occur:
(a) All unvested shares shall immediately vest in full [OR: vest pro-rata based on time served]
(b) The Company shall have a right of first refusal to repurchase shares at fair market value
(c) The deceased Founder's board seat shall [transfer to designated successor / expire and be reappointed by remaining shareholders]
(d) [Designated successor] shall assume operational control as acting CEO until a permanent replacement is appointed"
2. Designated Interim CEO
Pick someone (co-founder, board member, VP) who becomes acting CEO automatically. Put it in writing. Tell them.
This person should:
- Know where everything is (servers, bank accounts, investor contacts)
- Have authority to make decisions immediately
- Serve until board appoints permanent replacement
3. Life Insurance with Company as Beneficiary
Buy term life insurance:
- Enough to fund a transition (6–12 months runway)
- Company is beneficiary (not your estate)
- Pays out to cover salary for replacement CEO, pay down debt, or buy out your shares
Cost: Shockingly cheap in your 30s ($100–$300/month for $1M policy)
4. Vesting Acceleration Terms
Decide NOW whether death triggers:
- Full acceleration: All shares vest immediately (rewards your contribution, protects your family)
- Pro-rata acceleration: Only vested shares count (protects remaining founders from dilution)
Don't let your board decide while your spouse is grieving.
5. Operational Runbook
A document that says:
"If I die, here are the 10 people you need to call, here's where the bank logins are, here's who has server access, and here's who's authorized to make legal decisions."
Store it somewhere your co-founder/spouse/executor can find it.
Why Founders Don't Do This
"I'm 32 and healthy."
So were Amit and Rohan.
"It's morbid."
You know what's morbid? Your co-founder trying to figure out if your spouse owns 50% of the company while planning your funeral.
"We'll deal with it when we're bigger."
Your Series A investors will love hearing that your $10M company has no contingency plan for losing its CEO.
The 2-Hour Fix
This weekend:
- Open your SHA → Search for "death" → If it's not there, add succession language
- Pick an interim CEO → Tell them → Document it
- Get a term life quote → $200/month protects your company and family
- Write an ops runbook → 1 page: who to call, where stuff is, who's in charge
Takes two hours. Saves your company from implosion.
The Bottom Line
The time to plan for disaster is before disaster happens.
Not after.
