The Co-Founder Vesting Agreement is a crucial document for startups and new businesses in Pakistan, typically implemented at company formation or during early-stage structuring. It protects the interests of both the company and its co-founders by ensuring long-term commitment through gradual share vesting. This agreement is essential when multiple founders are involved and want to establish clear terms for equity ownership, particularly important in Pakistan's growing startup ecosystem where founder disputes can be complex to resolve. The document must comply with Pakistani corporate law, particularly the Companies Act 2017, and includes specific provisions for vesting schedules, cliff periods, good/bad leaver scenarios, and share transfer restrictions. It's commonly used alongside shareholders' agreements and company incorporation documents, providing a comprehensive framework for equity management and founder relationships.
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1. Parties: Identification of all co-founders and the company entering into the agreement
2. Background: Context of the agreement, including company formation, initial share allocation, and purpose of vesting
3. Definitions: Key terms used throughout the agreement including Vesting Period, Cliff Period, Good Leaver, Bad Leaver, etc.
4. Initial Share Allocation: Details of initial share distribution among co-founders
5. Vesting Terms: Core vesting schedule, timeline, and conditions for share vesting
6. Cliff Period: Specification of initial period before vesting begins
7. Acceleration Provisions: Circumstances triggering accelerated vesting (e.g., company sale)
8. Leaver Provisions: Treatment of unvested shares upon founder departure
9. Transfer Restrictions: Limitations on share transfers during vesting period
10. Tag-Along and Drag-Along Rights: Rights of co-founders in case of share sales
11. Representations and Warranties: Standard declarations by all parties
12. Confidentiality: Protection of company and agreement confidentiality
13. Governing Law and Jurisdiction: Specification of Pakistani law application and dispute resolution
14. General Provisions: Standard boilerplate clauses including amendments, notices, etc.
1. Right of First Refusal: Optional section for when co-founders want pre-emptive rights to purchase others' shares
2. Intellectual Property Assignment: Required if IP assignment hasn't been covered in separate agreements
3. Non-Competition: Optional restrictions on competing activities during and after involvement
4. Tax Provisions: Detailed tax handling if specific tax structuring is needed
5. Shareholder Approval Process: Required if company has existing shareholders beyond co-founders
6. Foreign Investment Provisions: Required if any co-founder is a foreign national
7. Deadlock Resolution: Optional mechanism for resolving disputes between co-founders
1. Schedule 1 - Share Allocation Table: Detailed breakdown of initial share allocation and vesting schedule
2. Schedule 2 - Vesting Timeline: Month-by-month vesting schedule with milestone dates
3. Schedule 3 - Share Valuation Methodology: Agreed method for valuing shares for buyback purposes
4. Schedule 4 - Deed of Adherence: Template for new shareholders to join the agreement
5. Schedule 5 - Company Details: Corporate information including registration numbers and address
6. Appendix A - Board Resolutions: Copies of board resolutions approving the vesting arrangement
7. Appendix B - Shareholders' Agreement Reference: Cross-reference to relevant provisions of shareholders' agreement
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