Entrepreneur divorce: when equity is real but not yet money
Founders' wealth sits in equity that cannot be sold, is subject to vesting, or depends on a future financing or exit.
Illiquid founder equity has no settled value today, and a division at the wrong moment can force a sale nobody wants or hand away the incentive that makes the equity worth anything.
Shareholders' agreement, option and vesting schedules, convertible instruments, SAFE or note terms, and any recent valuation used for a financing round.
When equity is not yet money
For an early-stage founder, the balance sheet may show almost nothing while the equity is the most valuable thing in the marriage — or nothing at all. Three features make these matters different from a divorce involving listed shares: the value is contingent on future events, the equity may be subject to vesting or transfer restrictions, and a change in the cap table has consequences for investors.
Vesting, options and unvested awards
- Vested equity is usually treated as an existing asset, valued on an accepted method rather than on the last round's headline number.
- Unvested or contingent equity raises the question of whether it is an asset at all, or an expected future benefit — the analysis depends on the instrument and on when the entitlement arose.
- Options are examined for exercise price, vesting conditions and whether exercise is even possible at the time of the dispute.
Because these instruments are conditional, the practical aim is usually to design an outcome that neither forces a sale nor gives away control: deferred compensation, a contingent payment on exit, or an offset against other assets.
Investors, cap table and disclosure
Where a company has outside investors, three practical problems arise: disclosure obligations under the financing documents, the need to obtain consents for a transfer of equity, and the risk that a dispute frightens the next round. Investors have an interest in continuity, and a structure that keeps the cap table stable is usually the settlement that everyone can live with. Founders should assume that a contested divorce will eventually be visible to investors, and plan accordingly.
China connection
Where the operating entity, the intellectual property or the founder's equity is held in China, Chinese law governs how the interest is determined and transferred, including the rights of other shareholders. Where the holding structure is offshore, a two-track approach — China-side determination plus offshore mechanics — is usually required. Both should be mapped before any settlement figure is discussed.
Frequently asked questions
Free initial review of jurisdiction, valuation and enforceability — before any cost is committed.