Shadow Equity Agreements are utilized in Indonesia when companies wish to provide key employees or contractors with economic rights similar to actual equity ownership, without transferring real shares. This approach is particularly valuable in Indonesian companies where direct foreign ownership may be restricted, or where companies want to maintain existing shareholding structures while still offering equity-like incentives. The document typically includes comprehensive details about the shadow equity units, vesting schedules, valuation methods, and payment triggers, all structured to comply with Indonesian corporate law, employment regulations, and tax requirements. These agreements are especially popular among startups and growing companies looking to attract and retain talent while maintaining control over their cap table.
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1. Parties: Identification of the company and the shadow equity recipient
2. Background: Context of the agreement and purpose of the shadow equity arrangement
3. Definitions: Key terms used throughout the agreement, including Shadow Equity Units, Fair Market Value, Exit Event, etc.
4. Grant of Shadow Equity: Details of the shadow equity units granted, including number of units and grant date
5. Vesting Provisions: Vesting schedule and conditions for the shadow equity units
6. Valuation Mechanism: Method for calculating the value of shadow equity units
7. Payment Terms: Conditions and process for payment of shadow equity benefits
8. Termination Provisions: Rights and obligations upon termination of employment or service
9. Confidentiality: Obligations regarding confidential information
10. Tax Provisions: Tax treatment and responsibilities
11. Assignment and Transfer: Restrictions on transfer of shadow equity rights
12. Governing Law and Jurisdiction: Application of Indonesian law and jurisdiction
13. Notices: Process for formal communications between parties
14. General Provisions: Standard boilerplate clauses including amendments, waiver, and severability
1. Change of Control Provisions: Used when specific provisions are needed for corporate restructuring or acquisition scenarios
2. International Payment Provisions: Required when recipient is based outside Indonesia or payments will be made internationally
3. Non-Competition and Non-Solicitation: Added when additional restrictive covenants are required
4. Special Vesting Acceleration: Include when specific events trigger accelerated vesting
5. Shareholder Approval: Required when shadow equity plan needs explicit shareholder approval
6. Foreign Investment Compliance: Include when foreign investment regulations apply
7. Data Protection: Added when personal data processing requires specific provisions
1. Schedule 1 - Shadow Equity Unit Details: Number of units, grant date, and specific terms of the grant
2. Schedule 2 - Vesting Schedule: Detailed vesting timeline and milestones
3. Schedule 3 - Valuation Methodology: Detailed calculation methods and examples for unit value determination
4. Schedule 4 - Notice of Exercise Form: Template for exercising shadow equity rights
5. Schedule 5 - Tax Calculation Examples: Illustrative examples of tax treatment
6. Appendix A - Shadow Equity Plan Rules: Complete rules of the shadow equity plan if part of a larger scheme
7. Appendix B - Board/Shareholder Resolutions: Copies of relevant corporate approvals
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