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Employee Shareholder Agreement

Employee Shareholder Agreement Template for Australia

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Key Requirements PROMPT example:

Employee Shareholder Agreement

"I need an Employee Shareholder Agreement for a tech startup in Sydney, offering 5% equity to our new CTO with a 4-year vesting schedule starting March 2025, including good/bad leaver provisions and tag-along rights."

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Document background
The Employee Shareholder Agreement is a crucial document for Australian companies implementing employee share schemes as part of their retention and incentivization strategy. This agreement is typically used when a company wants to offer shares to key employees or as part of a broader employee share ownership plan (ESOP). It outlines the complete relationship between the company and the employee as both a shareholder and staff member, ensuring compliance with the Corporations Act 2001 (Cth), Fair Work Act 2009 (Cth), and relevant tax legislation. The document includes essential information about share allocation, vesting schedules, transfer restrictions, and shareholder rights, while also addressing specific circumstances such as employment termination or company sale. It's particularly valuable for startups and growing companies in Australia looking to attract and retain talent through equity participation.
Suggested Sections

1. Parties: Identifies the company, the employee-shareholder, and any other relevant parties to the agreement

2. Background: Sets out the context of the agreement, including the employee's role and the purpose of share allocation

3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes interpretation principles

4. Share Allocation: Details of shares to be issued/transferred, including class, number, and price

5. Payment Terms: Terms for payment of shares, including any loan arrangements or salary sacrifice provisions

6. Vesting Conditions: Specifies the vesting schedule and conditions for share ownership

7. Employment Relationship: Links between employment status and shareholding rights

8. Shareholder Rights: Voting rights, dividend rights, and other shareholder entitlements

9. Transfer Restrictions: Limitations on transfer of shares and process for permitted transfers

10. Compulsory Transfer Events: Circumstances requiring share transfer, including termination of employment

11. Valuation Mechanism: Method for determining share value for transfers or buybacks

12. Confidentiality: Obligations regarding company and agreement confidentiality

13. Dispute Resolution: Process for resolving disputes between parties

14. General Provisions: Standard boilerplate clauses including notices, amendments, and governing law

Optional Sections

1. Tag-Along Rights: Rights of minority shareholders to join in sale of majority shareholding - include for minority shareholder protection

2. Drag-Along Rights: Rights of majority shareholders to force minorities to join in sale - include for exit flexibility

3. Good/Bad Leaver Provisions: Different treatment of shares based on circumstances of employment termination - include for more complex vesting structures

4. Share Buy-Back Arrangements: Detailed terms for company repurchase of shares - include if company wants right to buy back shares

5. Non-Competition Covenants: Restrictions on competing activities - include for senior employees or key personnel

6. Employee Loans: Terms of any loans provided to fund share purchase - include if company is financing share purchase

7. Tax Indemnities: Specific tax-related guarantees and indemnities - include if tax implications are complex

8. Performance Rights: Additional share rights based on performance metrics - include for performance-based equity schemes

Suggested Schedules

1. Share Certificate: Copy of share certificate or proof of shareholding

2. Deed of Adherence: Template deed for new shareholders to sign onto the agreement

3. Vesting Schedule: Detailed timeline and conditions for share vesting

4. Company Constitution: Copy or relevant excerpts of company constitution

5. Calculation of Fair Market Value: Detailed methodology for share valuation

6. Restricted Activities: Detailed list of restricted activities under non-compete provisions

7. Employee Share Scheme Rules: Complete rules of the employee share scheme

8. Tax Summary: Summary of tax implications and obligations

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈË°æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
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