The Founder Vesting Agreement is a crucial document used in South African companies, particularly startups and growth-stage businesses, to structure the gradual earning of company shares by founders over time. This agreement helps protect both the company and its stakeholders by ensuring long-term founder commitment while providing founders with a clear path to full share ownership. The document typically implements a vesting schedule with a cliff period, often four years total with a one-year cliff, aligned with international best practices while complying with South African corporate and securities laws. It becomes particularly important when companies seek external investment, as investors often require founder vesting arrangements to ensure key personnel remain committed to the company's success. The agreement must comply with the South African Companies Act and relevant financial regulations while addressing tax implications and corporate governance requirements.
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1. Parties: Identifies the contracting parties - typically the company and the founder
2. Background: Explains the context of the agreement, including the founder's role and the purpose of the vesting arrangement
3. Definitions: Defines key terms used throughout the agreement, including 'Vesting Period', 'Vesting Schedule', 'Cliff Period', etc.
4. Grant of Shares: Details the total number of shares subject to vesting and their class
5. Vesting Schedule: Specifies the vesting timeline, including cliff period and subsequent vesting increments
6. Vesting Conditions: Outlines the conditions that must be met for shares to vest
7. Founder Commitments: Details the founder's obligations and commitments during the vesting period
8. Company's Rights and Obligations: Specifies the company's responsibilities regarding share issuance and administration
9. Transfer Restrictions: Restrictions on transferring unvested and vested shares
10. Termination Provisions: Consequences of various termination scenarios on vesting
11. Tax Provisions: Addresses tax implications and responsibilities
12. General Terms: Standard contract terms including governing law, notices, and amendment procedures
1. Accelerated Vesting: Used when including provisions for accelerated vesting in case of specific triggers like change of control
2. Shareholder Rights: Include when specifying voting rights and other shareholder privileges for unvested shares
3. Reverse Vesting: Used when the founder receives shares upfront subject to company repurchase rights
4. Non-Compete and Non-Solicit: Include when adding restrictions on competitive activities
5. Intellectual Property Assignment: Used when IP assignment needs to be explicitly tied to the vesting arrangement
6. Drag-Along Rights: Include when majority shareholders need the right to force minority shareholders to join in the sale of the company
7. Tag-Along Rights: Used when minority shareholders should have the right to join in the sale of shares by majority shareholders
1. Schedule 1 - Vesting Schedule: Detailed breakdown of vesting dates and share quantities
2. Schedule 2 - Share Details: Specific details of the shares including class, rights, and restrictions
3. Schedule 3 - Company Information: Relevant company details including registration number, registered address, and directors
4. Schedule 4 - Founder Information: Detailed information about the founder including personal details and shareholding
5. Appendix A - Share Certificate Template: Template for share certificates to be issued upon vesting
6. Appendix B - Deed of Adherence: Template for binding additional parties to the agreement if needed
Relevant legal definitions
Clauses
Relevant Industries
Technology
Financial Services
E-commerce
Healthcare
Manufacturing
Professional Services
Media and Entertainment
Education Technology
Biotechnology
Clean Energy
Agricultural Technology
Software Development
Consulting
Retail
Relevant Teams
Legal
Human Resources
Executive Leadership
Board of Directors
Corporate Governance
Finance
Company Secretariat
Compliance
Operations
Relevant Roles
CEO
Founder
Co-Founder
Chief Technology Officer
Chief Financial Officer
Chief Operating Officer
Company Secretary
Legal Counsel
Corporate Lawyer
Investment Manager
Venture Capital Partner
Private Equity Manager
Start-up Advisor
Board Member
Director of Human Resources
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