To vest shares is the means of giving equity to its employees or consultants. Typically, this serves as an incentive to reach certain goals and/or stay with the company for an extended period. Share vesting is often a good option when a senior employee or advisor comes on board.
How to do it
Step 1: Check your company’s Constitution / Articles of Association
Check if the constitutional document of the company restricts buyback of its own shares. If it does, you may build in some appropriate mechanisms in your agreement, or you may consider another form of rewarding your team (for example a Share Option Plan).
Step 2: Create a Share Vesting Agreement
Create and draft a Share Vesting Agreement, which is the contract by which a company sells shares to an employee or a consultant which then vest over time or upon achieving certain goals.
Step 3: The share recipient pays for the shares and signs Share Power Agreement
The employee/consultant pays for the shares on the “Purchase Date” that you set in the agreement.
In addition, the employee/consultant signs a document known as a “Share Power” and delivers this document to the company secretary.
Draft a Share Power Agreement
Step 4: The company secretary issues and holds on to the share certificates
Also on the Purchase Date, the company secretary issues share certificates in the name of the employee/consultant which then becomes a shareholder of the company. The numbers of the share certificates and the number of shares covered by each certificate should match the vesting schedule.
The company secretary keeps the share certificates in the name of the employee/consultant and the Share Power in escrow.
Client case study
Shaun Barnett from Peculiar Inc Limited uses Zegal to give equity to its employee.