8 Clauses In Your Shareholders Agreement When Giving Shares To Your Employee

by | Feb 14, 2023 | Business, Contracts, Featured, Law

When giving shares to an employee, it’s important to have a clear and comprehensive shareholders agreement in place that outlines the terms and conditions of the arrangement. Here are some of the key clauses to consider including in the agreement:


1. Vesting Schedule: A vesting schedule outlines the conditions under which the employee will earn the right to the shares over time. This can include time-based vesting (e.g. after working for the company for a certain number of years), performance-based vesting (e.g. based on the employee’s performance), or a combination of both.


2. Transfer Restrictions: The agreement should include restrictions on the transfer of shares by the employee. This can help to ensure that the shares remain within the company and cannot be sold to third parties.


3. Buy-Back Provisions: The agreement should include provisions for the company to buy back the shares from the employee in certain circumstances, such as termination of employment or death. This can help to ensure that the company retains control of the shares.


4. Dividend and Voting Rights: The agreement should specify the employee’s rights with respect to dividends and voting on important company decisions.


5. Termination of Employment: The agreement should outline the consequences for the employee if their employment with the company is terminated, including any restrictions on the transfer of shares and the company’s right to buy back the shares.


6. Confidentiality and Non-Compete: The agreement should include confidentiality and non-compete clauses to protect the company’s confidential information and proprietary technology.


7. Dispute Resolution: The agreement should include a process for resolving disputes between the parties, such as mediation or arbitration or courts.


8. Governing Law: The agreement should specify the governing law that will apply in the event of a dispute.


It’s important to note that the specific clauses included in a shareholders agreement will vary depending on the circumstances of each case, and it’s always advisable to seek the advice of a legal professional.

Nik Erman Nik Roseli Commercial Lawyer

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