Document background
Shadow Equity Agreements are increasingly utilized in the Philippine business environment as an alternative to traditional equity compensation, particularly in startups and growing companies seeking to attract and retain top talent without diluting actual shareholding. These agreements are structured to comply with Philippine corporate, securities, and labor laws while providing a synthetic form of equity participation. The document typically includes detailed provisions on grant terms, vesting schedules, valuation methodologies, trigger events, and payment mechanisms. It's especially relevant in situations where actual share issuance is impractical due to foreign ownership restrictions, corporate structure limitations, or strategic considerations. The Shadow Equity Agreement serves as a crucial tool for aligning interests between the company and key personnel while maintaining clear corporate ownership structures.
