A Founder Vesting Agreement is a crucial document used when establishing or restructuring ownership in Australian companies, particularly startups and growing businesses. This agreement is implemented to protect the company and other stakeholders by ensuring founders remain committed to the business through a structured vesting schedule. It's particularly important when seeking investment, as investors often require vesting arrangements to be in place. The document typically includes detailed vesting schedules, provisions for different exit scenarios, and mechanisms for handling early departure situations. It must comply with Australian corporate law requirements, including the Corporations Act 2001 (Cth) and relevant tax regulations, particularly regarding employee share schemes and equity arrangements. The agreement is often put in place at company formation or before significant investment rounds.
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1. Parties: Identifies the company, the founder(s), and any other relevant parties to the agreement
2. Background: Sets out the context of the agreement, including the founder's role and the purpose of the vesting arrangement
3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes rules for interpretation
4. Share Details: Specifies the number and class of shares subject to vesting, including any special rights or restrictions
5. Vesting Schedule: Details the vesting timeline, milestones, and conditions for share vesting
6. Vesting Conditions: Specifies the conditions that must be met for shares to vest, including continued engagement with the company
7. Acceleration Events: Defines circumstances that trigger accelerated vesting (e.g., company sale, IPO)
8. Termination Provisions: Addresses what happens to vested and unvested shares upon various types of termination
9. Transfer Restrictions: Outlines restrictions on transferring shares during the vesting period
10. Company's Rights and Obligations: Details the company's responsibilities regarding share issuance and maintaining records
11. Founder's Rights and Obligations: Specifies the founder's responsibilities and rights regarding the shares
12. Confidentiality: Establishes confidentiality obligations regarding the agreement terms
13. General Provisions: Standard contract clauses including governing law, notices, and amendment procedures
1. Tax Provisions: Detailed tax clauses when specific tax elections or treatments need to be addressed
2. Drag Along Rights: Include when majority shareholders need the right to force minority shareholders to join in the sale of the company
3. Tag Along Rights: Include when minority shareholders should have the right to join in a sale by majority shareholders
4. Board Matters: Include when the founder's board position needs to be addressed in relation to vesting
5. International Considerations: Include when the founder or company operates across multiple jurisdictions
6. Intellectual Property: Include when IP rights need to be tied to the vesting arrangement
7. Dispute Resolution: Include when specific dispute resolution procedures are desired beyond standard court proceedings
1. Schedule 1 - Share Details: Detailed specification of share numbers, classes, and rights
2. Schedule 2 - Vesting Schedule: Detailed timetable of vesting dates and percentages
3. Schedule 3 - Deed of Accession: Form for additional parties to join the agreement if needed
4. Schedule 4 - Share Transfer Form: Template for executing share transfers
5. Schedule 5 - Company Constitution Excerpts: Relevant sections of the company constitution affecting the shares
6. Appendix A - Definitions: Extended definitions if too lengthy for main agreement
7. Appendix B - Worked Examples: Examples illustrating how vesting calculations work in different scenarios
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