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What is a Share Vesting Agreement?
A Share Vesting Agreement is a contract by which a company sells new shares to an employee or a consultant, which then vest over time or upon achieving certain goals.
Under a Share Vesting Agreement, shares are given to the purchaser upfront subject to the company’s right to buy back. This is also known as “reverse vesting” which is contrary to “forward vesting” under a Share Option Plan or Option Agreement.
Under a Share Vesting Agreement, if the purchaser leaves a company, the company has the right to buy back the unvested shares at the original purchase price. The company may also have the right to buy back the vested shares at fair value.
What is meant by “share vesting”?
How to create a Share Vesting Agreement?
How can the company exercise the repurchase option?
- what the procedures are that apply to share buyback (there could be different procedures depending on, for example, whether the repurchase price is paid out of the profits or capital of the company);
- whether a company is allowed to hold its own shares after buying them back; and
- whether stamp duty will apply and, if so, the rates that apply.
How can the company exercise the call option?
Key points included
- Number and type of shares to be sold;
- Total purchase price of the shares;
- When the sale will take place;
- Relationship between the purchaser and the company;
- Whether all or only part of the shares are subject to vesting;
- Vesting schedule: whether the shares will vest over time or upon achieving certain goals;
- Length of exercise period for the repurchase option;
- Whether the company will have a call option for the vested shares; and
- Length of exercise period for the call option.