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Equity Agreement
I need an equity agreement for a startup co-founder who will receive 10% equity vesting over 4 years with a 1-year cliff, including provisions for dilution protection and a buyback clause in case of departure.
What is an Equity Agreement?
An Equity Agreement spells out how ownership stakes are divided among shareholders in a Danish company. It creates legally binding terms for how shares can be bought, sold, or transferred, following Denmark's Companies Act (Selskabsloven) requirements. These contracts are especially common in startups and small businesses where founders want clear rules about their ownership rights.
Beyond basic share distribution, these agreements typically cover important details like voting rights, profit sharing, and exit procedures. They also include specific Danish corporate governance rules and often add protections for minority shareholders. The document becomes particularly valuable when bringing in new investors or planning for future company growth.
When should you use an Equity Agreement?
Consider creating an Equity Agreement when starting a new business venture in Denmark or bringing new shareholders into an existing company. This document becomes essential during key moments like forming partnerships, securing investment rounds, or implementing employee share schemes under Danish corporate law.
The timing is particularly critical when multiple parties are investing different amounts of capital or expertise. Having clear equity terms in place before disputes arise helps prevent costly conflicts and protects everyone's interests. It's especially valuable when setting up vesting schedules for founders, planning future funding rounds, or establishing clear exit mechanisms for shareholders.
What are the different types of Equity Agreement?
- Private Equity Subscription Agreement: Used for formal investment rounds, detailing share purchase terms and investor rights
- Phantom Equity Agreement: Provides synthetic equity rights to employees without actual share ownership
- Limited Partnership Agreement Private Equity: Structures investment funds and defines partner relationships
- Equity Transfer Agreement: Handles share sales between existing shareholders or to new investors
- Equity Investment Agreement: Covers direct company investments with detailed terms and conditions
Who should typically use an Equity Agreement?
- Company Founders: Create and sign Equity Agreements to establish initial ownership structures and protect their interests
- Corporate Lawyers: Draft and review agreements to ensure compliance with Danish corporate law and protect client interests
- Investors: Review and negotiate terms before providing capital, focusing on share rights and exit provisions
- Board Members: Oversee and approve equity distributions according to Danish governance requirements
- Employees: Participate in share schemes through equity agreements, especially in startups and growth companies
- Financial Advisors: Guide clients on equity structure and valuation implications
How do you write an Equity Agreement?
- Company Details: Gather full legal names, registration numbers, and addresses of all participating entities
- Ownership Structure: Document current shareholdings and planned equity distribution percentages
- Investment Terms: Define share price, payment schedule, and capital contribution requirements
- Voting Rights: Specify decision-making powers and any special voting arrangements
- Exit Provisions: Outline procedures for share transfers, buy-outs, and company sale scenarios
- Compliance Check: Review Danish corporate law requirements and shareholder rights regulations
- Document Generation: Use our platform to create a legally sound agreement that includes all mandatory elements
What should be included in an Equity Agreement?
- Party Information: Complete legal names, registration numbers, and addresses of all shareholders
- Share Details: Precise description of share classes, numbers, and nominal values
- Consideration: Clear terms for payment or contribution against shares
- Transfer Rights: Rules for selling or transferring shares, including pre-emptive rights
- Voting Rights: Detailed voting procedures and majority requirements
- Dividend Policy: Terms for profit distribution and reinvestment
- Dispute Resolution: Danish arbitration or court jurisdiction specifications
- Exit Mechanisms: Procedures for company sale, IPO, or shareholder departure
- Governing Law: Explicit reference to Danish corporate law compliance
What's the difference between an Equity Agreement and a Simple Agreement for Future Equity?
An Equity Agreement differs significantly from a Simple Agreement for Future Equity (SAFE) in several key aspects under Danish law. While both deal with company ownership, they serve distinct purposes and situations.
- Timing of Rights: Equity Agreements create immediate ownership rights, while SAFEs promise future equity conversion upon specific trigger events
- Legal Complexity: Equity Agreements require more detailed terms covering current shareholding structure, voting rights, and governance, whereas SAFEs are intentionally simpler documents
- Investment Structure: Equity Agreements define current share pricing and ownership percentages, while SAFEs delay valuation decisions until future funding rounds
- Shareholder Status: Equity Agreement signatories become immediate shareholders with voting rights; SAFE holders must wait for conversion events to gain these privileges
- Regulatory Requirements: Equity Agreements must comply with comprehensive Danish corporate law requirements, while SAFEs face fewer immediate regulatory obligations
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