The Employee Share Agreement is a crucial document used when companies wish to grant shares to their employees as part of compensation, incentivization, or retention strategies. Common in both startups and established companies in England and Wales, this agreement defines the relationship between the company and employee-shareholders, protecting both parties' interests. It typically includes detailed provisions on share vesting, good/bad leaver scenarios, tax implications, and compliance with UK corporate and employment law requirements. The agreement is particularly important for companies looking to align employee interests with company success while maintaining appropriate controls over share ownership.
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1. Parties: Identifies the company and employee participating in the share agreement
2. Background: Sets out the context and purpose of the share agreement
3. Definitions: Defines key terms used throughout the agreement
4. Grant of Shares: Details of the shares being granted, including number, class, and price
5. Vesting Provisions: Terms and conditions for share vesting, including vesting schedule and conditions
6. Transfer Restrictions: Limitations on transfer of shares and any lock-up periods
7. Termination Provisions: Consequences of employment termination on share ownership
8. Tax Obligations: Tax responsibilities of both parties and compliance requirements
1. Good/Bad Leaver Provisions: Different treatment of shares based on circumstances of leaving employment (voluntary resignation vs. termination for cause)
2. Tag-Along Rights: Rights of minority shareholders to join in the sale of shares when a majority shareholder sells their stake
3. Drag-Along Rights: Rights of majority shareholders to force minority shareholders to join in the sale of shares
4. Share Buyback Provisions: Company's right to repurchase shares under specific circumstances
5. Restrictive Covenants: Non-compete and confidentiality obligations related to share ownership
1. Share Certificate Template: Form of share certificate to be issued to the employee
2. Articles of Association Extract: Relevant excerpts from company's articles affecting share rights and restrictions
3. Shareholders' Agreement Summary: Key provisions from existing shareholders' agreement affecting employee shareholders
4. Tax Election Forms: Required tax forms including Section 431 election forms
5. Vesting Schedule: Detailed timeline and conditions for share vesting
6. Share Valuation: Independent valuation of shares or methodology for share price calculation
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