A share vesting agreement is a contract that outlines the terms and conditions of a company`s stock options or shares. This agreement is an important tool for startups and other businesses looking to structure ownership and provide incentives to employees and shareholders. In Australia, share vesting agreements are commonly used and provide a clear framework for vesting, transfer, and other important elements of share ownership.
If you`re looking to create a share vesting agreement for your Australian business, here are some important things you should know:
1. Define the vesting schedule: This is the timeline for when shares will be transferred to the shareholder. Typically, vesting schedules are structured over a period of years and may include milestones such as reaching certain revenue or growth targets. A standard vesting schedule is four years with a one-year cliff, meaning that the shares will not start to vest until the employee has been with the company for one year.
2. Determine the transfer restrictions: Share vesting agreements typically include restrictions on the transfer of shares. For example, a shareholder may be prohibited from transferring shares until they have vested or until a certain period of time has passed. The agreement should also include provisions for transferring shares to family members or other approved parties.
3. Address termination and forfeiture: Shareholders may forfeit their shares if they leave the company before the shares have vested. The agreement should outline what happens to the shares in the event of termination or resignation, and whether the shareholder will receive any compensation for forfeited shares.
4. Include tax implications: Share vesting agreements can have both tax implications for the company and the shareholder. The agreement should address any tax implications and outline how taxes will be paid on any shares that are transferred.
5. Seek legal advice: Share vesting agreements can be complex, and it`s important to seek legal advice to ensure that the agreement is legally binding and enforceable. There are many templates available online, but it`s important to have a lawyer review and customize the agreement to meet your specific needs.
In conclusion, a share vesting agreement is a crucial tool for any Australian business looking to structure ownership and provide incentives to employees and shareholders. By defining the vesting schedule, transfer restrictions, termination and forfeiture terms, and tax implications, you can create a clear and enforceable agreement that protects the interests of all parties involved. Remember to seek legal advice and customize the agreement to meet your specific needs.