Shadow Equity Agreement

Shadow Equity Agreement Template for Austria

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Key Requirements PROMPT example:

"I need a Shadow Equity Agreement under Austrian law for our senior software developer, with a 4-year vesting schedule starting March 2025 and accelerated vesting provisions in case of an IPO."

Document background

Shadow Equity Agreements are increasingly used by Austrian companies as an alternative to traditional equity participation, particularly in scenarios where actual share transfer is impractical or undesired. These agreements are commonly implemented when companies wish to incentivize key employees or contractors while maintaining their existing shareholder structure. The document outlines the terms of synthetic equity rights, including vesting conditions, valuation methods, and payment triggers, all structured within the framework of Austrian law. It provides detailed calculations for determining the beneficiary's economic participation in the company's value growth without conferring actual shareholder rights. This type of agreement is particularly valuable for startups and growing companies that want to offer competitive incentive packages while maintaining corporate governance simplicity.

Suggested Sections

1. Parties: Identification of the company and the beneficiary of the shadow equity rights

2. Background: Context of the agreement, including the company's intention to grant synthetic equity rights

3. Definitions: Key terms used throughout the agreement, including 'Shadow Equity Units', 'Exit Event', 'Fair Market Value', etc.

4. Grant of Shadow Equity: Details of the shadow equity units being granted, including number of units and percentage of virtual participation

5. Vesting Provisions: Vesting schedule and conditions for the shadow equity units

6. Valuation Mechanism: Method for determining the value of shadow equity units, including timing and procedure

7. Payment Triggers: Events that trigger payment obligations, such as exit events, IPO, or other liquidation events

8. Payment Calculations: Formula and methodology for calculating payments due to the beneficiary

9. Tax Treatment: Tax implications and responsibilities of both parties under Austrian tax law

10. Confidentiality: Obligations regarding confidential information and trade secrets

11. Term and Termination: Duration of the agreement and circumstances under which it can be terminated

12. Governing Law and Jurisdiction: Specification of Austrian law as governing law and jurisdiction for disputes

Optional Sections

1. Good Leaver/Bad Leaver Provisions: Specific provisions defining consequences of different types of employment termination

2. Anti-dilution Protection: Provisions protecting the relative value of shadow equity in case of corporate events

3. Tag-Along Rights: Virtual participation rights in case of majority shareholder sale

4. Employee Obligations: Additional provisions specific to employees, used when beneficiary is an employee

5. Non-Competition: Restrictions on competitive activities, typically included for key personnel

6. Dispute Resolution: Alternative dispute resolution mechanisms, such as arbitration or mediation

7. Assignment and Transferability: Provisions regarding whether and how rights can be transferred

8. Information Rights: Rights to receive company information and financial reports

Suggested Schedules

1. Schedule 1 - Vesting Schedule: Detailed breakdown of the vesting timeline and milestones

2. Schedule 2 - Calculation Examples: Examples illustrating how payments would be calculated in various scenarios

3. Schedule 3 - Virtual Shareholding Certificate: Format of the certificate evidencing shadow equity rights

4. Schedule 4 - Valuation Principles: Detailed methodology for company and shadow equity valuation

5. Schedule 5 - Consent Forms: Required forms for spouse consent or regulatory compliance

6. Appendix A - Company Cap Table: Current capitalization table showing actual and virtual equity

7. Appendix B - Tax Treatment Summary: Summary of tax implications under Austrian law

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok��˰� | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co

Relevant legal definitions

Clauses

Relevant Industries

Technology

Software Development

Financial Services

Professional Services

Manufacturing

E-commerce

Healthcare

Biotechnology

Consulting

Media and Entertainment

Real Estate

Consumer Goods

Energy

Telecommunications

Relevant Teams

Legal

Human Resources

Finance

Executive Leadership

Corporate Development

Compensation & Benefits

Accounting

Operations

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Technology Officer

Managing Director

Senior Developer

Head of Sales

Chief Operating Officer

Senior Manager

Department Head

Key Account Manager

Technical Lead

Product Manager

Principal Engineer

Senior Consultant

Business Development Director

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