Share Vesting Agreement
GRANTING EQUITY WHILE STAYING IN CONTROL
Adding a co-founder or awarding your employees shares of your company? It’s essential to outline the terms of this transaction in a share vesting agreement. This agreement defines how many shares someone will receive, whether or not (and when) they can sell these shares, and what percentage of the company they’re able to own.
The Benefits of Share Vesting Agreements
A share vesting agreement allows you to retain control of your company while motivating and rewarding partners or staff with equity. A share vesting agreement gives you the ability to vest shares (or options, in which case it’s called an options vesting agreement) for your staff on a predetermined schedule and gives you flexibility when it comes to the timing of vesting.
FAQ
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Share vesting determines how shares granted to an employee/contractor or partner become fully owned by them — or “vested.” Vesting can be triggered by the passage of time or by hitting certain milestones, such as revenue objectives or other employee performance metrics. Offering equity can help you attract and retain top talent in a competitive job market, especially in the early stages of a company when funds for salaries may be more limited.
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Giving away equity in your business without a proper share vesting agreement in place can result in significant risk for your business and its existing shareholders. In addition to unintentionally giving away decision-making control, you may create confusion around how many shares someone will receive and when they can sell them, leading to potential conflict and misunderstandings.
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We highly recommend seeking legal counsel to create a share vesting agreement. At Parr Business Law, our lawyers have a tried-and-true process for creating these agreements. First, we determine who will be involved in the share vesting agreement; this is typically your company and its employees. Next, we determine whether or not there are any rules that must be followed for vesting agreements within the company bylaws or any shareholders’ agreements, or if there are any laws that apply and need to be complied with. Then we create an outline for the document, which should include all the relevant information about vesting agreements and how they will affect each party involved. Finally, we write the final draft and put your share vesting agreement into place.
Need Expert Guidance with Share Vesting Agreements?
When you’re ready to reward staff and potential business partners with shares of your company, Parr Business Law can help you develop a legally sound share vesting agreement. Our lawyers have the specialized knowledge to provide you with reliable and candid legal advice so you can protect your interests and avoid any potential conflict down the road. Schedule a consultation call with us today to learn more.