The Founder Vesting Agreement is a crucial document used in UAE companies, particularly startups and growing businesses, to align founder and company interests over an extended period. It establishes a structured framework where founders earn their equity over time or upon achieving specific milestones, rather than receiving it all upfront. This approach helps protect the company and other stakeholders while incentivizing long-term founder commitment. The agreement must comply with UAE Federal Law No. 32 of 2021 (Companies Law) and related regulations, including specific free zone requirements if applicable. It typically includes detailed vesting schedules, provisions for early departure scenarios, share transfer restrictions, and mechanisms for handling unvested shares. The document is particularly important in venture-backed companies or when multiple founders are involved, providing clarity and security for all parties while ensuring compliance with local legal requirements.
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1. Parties: Identification of the company, the founder(s), and any other relevant parties such as shareholders or trustees
2. Background: Context of the agreement, including company formation, founder's role, and purpose of the vesting arrangement
3. Definitions: Key terms used throughout the agreement including Vesting Period, Vesting Date, Shares, Clawback, Good Leaver, Bad Leaver, etc.
4. Share Allocation: Details of the total shares subject to vesting, including class of shares and nominal value
5. Vesting Schedule: Detailed timeline and conditions for the vesting of shares, including cliff period if applicable
6. Vesting Conditions: Specific requirements that must be met for shares to vest, including continued employment/service
7. Transfer Restrictions: Limitations on the founder's ability to transfer, pledge or encumber unvested shares
8. Termination Provisions: Consequences of termination of employment/service, including Good Leaver and Bad Leaver provisions
9. Company's Rights: Company's rights regarding unvested shares, including repurchase rights and price
10. Founder's Obligations: Ongoing commitments and responsibilities of the founder during the vesting period
11. Tax Implications: Acknowledgment and handling of tax consequences related to the vesting of shares
12. Confidentiality: Obligations regarding confidential information and trade secrets
13. Governing Law and Jurisdiction: Specification of UAE law as governing law and relevant courts for dispute resolution
14. General Provisions: Standard boilerplate clauses including amendments, notices, and severability
1. Milestone-Based Vesting: Used when vesting is tied to specific performance metrics or company milestones rather than time-based only
2. Accelerated Vesting: Included when there are provisions for acceleration of vesting upon certain events like change of control
3. Tag-Along Rights: Optional protection for minority shareholders in case of sale of majority stake
4. Drag-Along Rights: Included when majority shareholders want the right to force minority shareholders to join in the sale of the company
5. Intellectual Property Rights: Additional section when the founder is involved in technical development or IP creation
6. Non-Competition and Non-Solicitation: Added when additional restrictions on founder's activities are required
7. Shareholder Rights: Included when specific voting or dividend rights need to be addressed
8. Board Representation: Used when founder is guaranteed board position during vesting period
1. Schedule 1 - Share Details: Detailed breakdown of share allocation, including share certificate numbers and share class details
2. Schedule 2 - Vesting Schedule: Detailed timetable showing vesting dates and percentages of shares vesting at each date
3. Schedule 3 - Milestone Criteria: If applicable, detailed description of milestones that trigger vesting events
4. Schedule 4 - Company Valuation: Agreed valuation metrics for share pricing in case of repurchase
5. Schedule 5 - Deed of Adherence: Template for additional parties to join the agreement if required
6. Appendix A - Share Transfer Form: Template form for executing share transfers
7. Appendix B - Board Resolutions: Pro-forma board resolutions required for implementing the vesting arrangement
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