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Restricted Stock Award Agreement Template for Canada

A Canadian Restricted Stock Award Agreement is a legal document that governs the grant of company shares to an employee, subject to certain restrictions and vesting conditions. The agreement outlines the terms under which the shares are granted, including vesting schedules, transfer restrictions, and forfeiture provisions, while ensuring compliance with Canadian securities laws, provincial regulations, and tax requirements. It serves as a key element of equity-based compensation, typically used for employee retention and alignment of interests with company shareholders, while addressing specific Canadian legal requirements such as provincial securities exemptions and income tax implications.

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What is a Restricted Stock Award Agreement?

The Restricted Stock Award Agreement is a crucial document used by Canadian companies to grant shares of company stock to employees as part of their compensation package. This agreement is typically implemented when a company wishes to provide equity-based incentives to attract, retain, and motivate key employees while ensuring their long-term commitment to the company's success. The document must comply with Canadian federal and provincial securities laws, tax regulations, and corporate requirements. It specifies the number of shares granted, vesting schedule, restrictions on transfer, and conditions that must be met before the shares fully vest with the employee. The agreement is particularly important for both private and public companies in Canada, as it helps structure equity compensation while maintaining compliance with regulatory requirements and protecting the company's interests.

What sections should be included in a Restricted Stock Award Agreement?

1. Parties: Identification of the company issuing the restricted stock and the employee receiving the award

2. Background: Context of the agreement, reference to the equity incentive plan, and board approval

3. Definitions: Key terms used throughout the agreement including 'Restricted Stock', 'Vesting Date', 'Cause', etc.

4. Grant of Restricted Stock: Details of the stock award including number of shares, grant date, and par value if applicable

5. Vesting Schedule: Specific timeline and conditions for when restrictions on the shares will lapse

6. Restrictions on Transfer: Limitations on selling, transferring, or encumbering the shares before vesting

7. Rights as a Shareholder: Voting rights, dividend rights, and other shareholder privileges during the restriction period

8. Tax Matters: Canadian tax implications, withholding requirements, and tax reporting obligations

9. Termination of Employment: Impact of various types of employment termination on unvested shares

10. Compliance with Securities Laws: Acknowledgments and agreements regarding securities law compliance

11. General Provisions: Standard contractual terms including notices, amendments, governing law, etc.

What sections are optional to include in a Restricted Stock Award Agreement?

1. Change in Control Provisions: Special vesting provisions in case of merger, acquisition, or other corporate transactions - used for public companies or those contemplating exit events

2. Performance Conditions: Additional vesting conditions tied to company or individual performance metrics - used when award includes performance-based vesting

3. Lock-up Agreement: Additional holding period restrictions after vesting - typically used for public companies or pre-IPO companies

4. Clawback Provisions: Company's right to recoup shares in certain circumstances - used when required by company policy or regulations

5. International Supplement: Additional terms for non-Canadian employees - used when agreement template will cover international participants

6. Electronic Acceptance: Terms for electronic agreement and administration - used when company uses electronic equity management system

What schedules should be included in a Restricted Stock Award Agreement?

1. Schedule A - Notice of Grant: Specific details of individual grant including number of shares, grant date, and vesting schedule

2. Schedule B - Acknowledgment and Statement of Decision: Participant's formal acceptance and investment representations required by securities laws

3. Schedule C - Section 83(b) Election Form: Tax election form for participants who are subject to US taxation

4. Appendix A - Stock Power: Form to transfer shares back to company if vesting conditions not met

5. Appendix B - Spousal Consent: Consent form for participant's spouse if required by provincial family law

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Canada

Document Type

Stock Agreement

Cost

Free to use

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