The Phantom Share Agreement serves as a crucial instrument for companies in Malaysia seeking to implement long-term incentive plans without diluting existing shareholdings. This document type is particularly valuable when actual share issuance is impractical due to corporate structure, shareholder restrictions, or regulatory requirements. The agreement details the grant of phantom shares, which mirror the economic benefits of actual shares while maintaining compliance with Malaysian employment law, securities regulations, and tax provisions. It includes essential terms such as vesting schedules, valuation methodologies, payment mechanisms, and termination provisions, making it suitable for both private and public companies looking to attract and retain key talent through synthetic equity participation.
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1. Parties: Identifies the company issuing the phantom shares and the participant receiving them
2. Background: Sets out the context of the agreement and the company's intention to grant phantom shares
3. Definitions and Interpretation: Defines key terms including 'Phantom Shares', 'Fair Market Value', 'Vesting Date', and other relevant terms
4. Grant of Phantom Shares: Specifies the number of phantom shares granted and the terms of the grant
5. Vesting Conditions: Details the vesting schedule and any conditions that must be met for vesting to occur
6. Valuation Mechanism: Explains how the value of phantom shares will be calculated
7. Payment Terms: Specifies when and how payments will be made upon vesting or exercise
8. Termination Provisions: Addresses what happens to phantom shares upon termination of employment
9. Tax Provisions: Addresses tax implications and responsibilities
10. Confidentiality: Requires the participant to maintain confidentiality about the agreement terms
11. Governing Law and Jurisdiction: Specifies Malaysian law as governing law and sets jurisdiction for disputes
1. Change of Control: Addresses what happens to phantom shares in case of company sale or merger
2. Non-Competition and Non-Solicitation: Includes restrictive covenants if required for senior employees
3. Clawback Provisions: Allows company to recoup payments in cases of misconduct or financial restatement
4. Dividend Equivalent Rights: Provides for payment equivalent to dividends if company wishes to mirror this aspect of real shares
5. Administration: Details how the phantom share program will be administered if part of a larger scheme
1. Grant Notice: Details of the specific grant including number of shares and grant date
2. Vesting Schedule: Detailed breakdown of vesting dates and proportions
3. Valuation Methodology: Detailed explanation of how phantom shares will be valued
4. Tax Treatment Summary: Summary of tax implications under Malaysian law
5. Form of Exercise Notice: Template for participant to exercise vested phantom shares
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