Silicon Valley Legal Bible(29)Spousal Consent—Why Do Founders Need to Sign Spousal Consent When Entering Partnership Agreements?
Spousal Consent is one of the most headache-inducing documents in equity agreements for founders. Why do I have to drag my wife into signing paperwork just because I’m starting a business with a few buddies? At home, my wife manages everything from groceries to pots and pans—do I really need her permission to start a company? Especially when signing a Spousal Consent, young founders can casually add their spouse’s name, while divorced middle-aged men are left handing in blank forms. [Insert laughing video clip here]. So, what exactly is Spousal Consent? Why must every founder sign it? What happens if you don’t? Let’s dive into the details today.
The Silicon Valley Codex: 42 Chapters, a legal encyclopedia tailored for founders. I’m Liu Xiaoxiao, a U.S. attorney in Silicon Valley, here to decode the legal logic behind entrepreneurship.
1. What Is Spousal Consent?
Spousal Consent is typically attached at the end of equity agreements.
What does signing Spousal Consent mean?
1.1 Consent to Disposition of Current Community Property
First, it signifies consent to the disposition of current community property. In other words, the spouse agrees: “I approve of my husband joining this startup as a founder.” Some might ask, “Why do I need my wife’s permission to become a shareholder?” The answer is yes—you absolutely do. Becoming a founder involves disposing of community property. “Wait, how?” Becoming a founder means purchasing shares in a startup, even if they’re cheap—millions of shares for just a few hundred dollars.
This still counts as community property. If a spouse disagrees, they could later claim the disposition was invalid. You’ve likely heard of the case where Lang Xianping’s payments to a flight attendant were clawed back by his legal wife. A similar U.S. example involves Donald Sterling, former owner of the NBA’s Los Angeles Clippers. (We won’t delve into details here.) Your spouse may not interfere now, but they retain the legal right to do so.
Some argue: “If buying groceries requires spousal consent, wouldn’t daily life collapse?” Not quite. Routine household expenses fall under “incidental agency”—either spouse can unilaterally decide. However, founding a startup is not incidental. It’s a life-altering decision, even if the monetary investment seems small.
Others counter: “Why don’t brokers like Fidelity, Merrill Lynch, or Charles Schwab require spousal consent for buying Apple stock?” The difference lies in impact. Startup equity represents a long-term commitment, whereas public stock trading, though potentially costly, doesn’t fundamentally reshape a family’s trajectory.
1.2 Waiver of Future Disposition Rights
Second, it signifies waiving future disposition rights. The spouse states: “My husband can sell his founder shares anytime, in whole or part, without my input.” However, this does not waive ownership rights. If divorce occurs, the spouse still claims half the proceeds.
2. Consequences of Not Signing
What happens if you skip Spousal Consent? As explained above, an unhappy spouse could derail your business.
Additionally, investors will demand it. No signature? No funding.
“Why should investors care about my marital issues?” They do. Take the cautionary tale of Tudou (All Potatoes).
In 2010, Tudou, a leading Chinese video platform, filed for a U.S. IPO. Days later, founder Wang Wei’s ex-wife, Yang Lei, sued to split his shares in Tudou’s core entity. The legal battle delayed Tudou’s IPO, allowing rival Youku to dominate. Post-scandal, investors not only required Spousal Consents but even conducted “marital due diligence”—visiting founders’ homes to assess marital harmony.
3. U.S. Community Property States
Some founders argue: “If I’m in a separate property state, can I skip Spousal Consent?”
No.
Nine U.S. states follow community property laws, including startup hubs like California (Silicon Valley) and Washington (Seattle):
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
Note: Property classification depends on residency history. To avoid retroactive analysis, signing Spousal Consent is safer.
Spousal Consent protects founders—it’s not red tape. For visionary founders like you (yes, you reading this), it’s a tool to safeguard your legacy.
The Silicon Valley Codex: 42 Chapters, a legal encyclopedia tailored for founders. I’m Liu Xiaoxiao. See you next time.
