GoKwik has added a contentious twist to its ESOP policy. Under the new rules, current and former employees could forfeit their unvested and vested-but-unexercised options if they join any of GoKwik’s nine rivals. Can the startup use ESOPs to restrict where its talent goes next?

A New Kind Of Restriction: GoKwik’s amended ESOP Plan 2021 names Razorpay, Shiprocket, CRED, Cashfree Payments, BiteSpeed, Snapmint, WebEngage, Shopflo and Pine Labs as restricted companies. Employees cannot join, advise and invest in them without risking the loss of outstanding options. Crucially, the restriction applies retroactively to previously issued grants and extends for two full years after an employee’s departure.

Employees In Limbo: For GoKwik employees with significant ESOP holdings, the new policy has created a difficult choice between career mobility and potential wealth loss. Many are weighing offers from larger or better-known companies against the risk of forfeiting ESOPS they have already earned the right to exercise.

The timing has added to concerns. GoKwik has seen several senior-level departures in the recent past, while the recent layoff, earlier this year, is further adding to the staff’s concerns.

A Legal Gray Area: Non-compete clauses are common in Indian employment agreements, but explicitly linking rivals to the forfeiture of vested options is unusual. Legal experts believe that GoKwik’s amendment could face legal scrutiny if it is used to penalise employees for joining a competitor. 

The issue also raises governance concerns. By converting earned equity into an aggressive retention tactic, startups risk eroding the trust that underpins employee wealth creation.

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