The Founder Stock Restriction Agreement is a critical document used when establishing or restructuring ownership arrangements in UAE companies, particularly for startups and growing businesses. This agreement becomes essential when companies need to ensure founder commitment, protect intellectual property, and maintain stable ownership structures during crucial growth phases. The document typically includes detailed vesting schedules, transfer restrictions, and repurchase rights, all aligned with UAE corporate law requirements and market practices. It serves as a fundamental tool for risk management and corporate governance, helping prevent potential ownership disputes while ensuring founders remain committed to the company's long-term success. The agreement must comply with UAE Federal Law No. 32 of 2021 and relevant free zone regulations where applicable.
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1. Parties: Identification of the company, founders, and any other relevant parties to the agreement
2. Background: Context of the agreement, including company formation details and purpose of the restrictions
3. Definitions: Key terms used throughout the agreement, including technical and legal definitions
4. Stock Subject to Restrictions: Details of restricted shares, including number, class, and initial ownership
5. Vesting Schedule: Specific timeline and conditions for the vesting of restricted shares
6. Transfer Restrictions: Limitations on the transfer of shares, including right of first refusal and co-sale rights
7. Repurchase Rights: Company's rights to repurchase unvested or restricted shares under specific conditions
8. Termination Provisions: Effects of employment termination on share ownership and vesting
9. Founder Representations and Warranties: Founders' confirmations regarding share ownership and compliance
10. Company Representations and Warranties: Company's confirmations regarding authorization and share issuance
11. Confidentiality: Provisions regarding the confidential treatment of company information
12. Dispute Resolution: Procedures for resolving disputes, including jurisdiction and applicable law
13. General Provisions: Standard contractual terms including notices, amendments, and severability
1. Tag-Along Rights: Optional provisions giving founders the right to join in sale of shares by other shareholders
2. Drag-Along Rights: Optional provisions allowing majority shareholders to force minority shareholders to join in sale
3. IPO Provisions: Special provisions applicable in case of future public offering
4. Special Voting Rights: Additional voting rights or restrictions for founder shares
5. Lock-up Period: Additional time-based restrictions on share transfers
6. Family Transfer Provisions: Special provisions for transfer of shares to family members
7. Death and Disability Provisions: Special handling of shares in case of founder's death or disability
8. Anti-dilution Protection: Provisions protecting founders from equity dilution in future funding rounds
1. Schedule A - Share Details: Detailed information about restricted shares including certificate numbers and issuance dates
2. Schedule B - Vesting Schedule: Detailed timeline and milestones for share vesting
3. Schedule C - Permitted Transfers: List of pre-approved transfer scenarios and recipients
4. Schedule D - Fair Market Value Calculation: Methodology for calculating share value for repurchase purposes
5. Appendix 1 - Share Certificates: Copies of relevant share certificates
6. Appendix 2 - Board Resolutions: Copies of board resolutions approving the restrictions
7. Appendix 3 - Spousal Consent: Consent forms from spouses of founders (if required)
8. Appendix 4 - Notice Forms: Template forms for various notices required under the agreement
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