Setting up a company share structure can be complex. But concepts such as share vesting may be incredibly useful for your company and are well worth learning about, especially when you’re first starting up.
But what is share vesting and when do you need to be thinking about it?
Here’s what you need to know.
What Is A Share Vesting Agreement?
A Share Vesting Agreement is an agreement under which a company provides potential shareholders with shares that ‘vest’ on an incremental basis over a period of time or upon achieving certain milestones.
This means you can specify that the investor, founder or employee signing the Share Vesting Agreement will only be issued shares after they have completed a certain action, such as staying with the company for a set period of time.
Why Do I Need A Share Vesting Agreement?
The primary reason for using a Share Vesting Agreement is to incentivise investors, founders or employees to invest or commit to your company long-term, especially while you have limited capital.
This can help protect your company in case the relationship doesn’t work out. It also encourages the other party to help the company grow and perform in order to make their vested shares become more valuable.
Share vesting is essentially a method for you to grow your company while incentivising your workforce and protecting your capital.
What Is Included In A Share Vesting Agreement?
A Share Vesting Agreement typically includes clauses regarding:
- The number of shares being issued
- The price per vesting share
- The consequences of failure to vest
A good lawyer will be able to draft your Share Vesting Agreement to ensure that your employees, founders or investors are clear on the details of the agreement, and that you’re protected if a dispute arises.
At Sprintlaw, we focus on drafting comprehensive, easy to understand and user-friendly agreements for businesses.
Feel free to get in touch with us to get things started with your Share Vesting Agreement! Our friendly team can be reached at [email protected].
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