The Equity Grant Agreement is a crucial legal instrument used by companies in Hong Kong to formalize the provision of equity-based compensation to employees, directors, consultants, or other eligible individuals. This document is particularly important in sectors where equity compensation is a key talent attraction and retention tool, such as technology and financial services. The agreement must comply with Hong Kong's legal framework, including the Companies Ordinance (Cap. 622) and Securities and Futures Ordinance (Cap. 571). It typically includes detailed provisions on grant terms, vesting conditions, exercise procedures, transfer restrictions, and tax implications. Companies commonly use this agreement as part of their overall compensation strategy to align recipient interests with long-term business success while ensuring regulatory compliance.
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1. Parties: Identifies the company making the grant and the recipient
2. Background: Sets out the context of the grant and the company's authority to make it
3. Definitions and Interpretation: Defines key terms used throughout the agreement and interpretation rules
4. The Grant: Details of the equity being granted, including number of shares/options and grant date
5. Vesting: Vesting schedule and conditions that must be met
6. Exercise Terms: Process and conditions for exercising the grant, including pricing and timing
7. Restrictions on Transfer: Limitations on selling or transferring the granted equity
8. Termination: Consequences of employment termination or other events on the grant
9. Tax Obligations: Responsibilities for tax payments and reporting
10. Compliance with Laws: Requirements for compliance with securities laws and other regulations
11. Notices: How formal communications between parties should be made
12. General Provisions: Standard contractual terms including governing law, amendments, and entire agreement
1. Clawback Provisions: Used when the company wants right to reclaim equity in specific circumstances
2. Lock-up Period: Include when there are specific timing restrictions on selling the equity
3. Performance Conditions: When vesting is tied to specific performance metrics or company goals
4. Change of Control: Include when specifying what happens to the grant in case of company sale/merger
5. Shareholders' Rights: When recipients get specific voting or other shareholder rights
6. Bad Leaver Provisions: Used when different terms apply based on reason for employment termination
7. Non-Competition and Confidentiality: When additional restrictions on recipient's activities are required
1. Grant Details: Detailed specification of the equity grant including number, class, and price
2. Vesting Schedule: Detailed timeline and conditions for vesting of the grant
3. Company Information: Key details about the company and its share capital structure
4. Exercise Notice: Template form for exercising the grant
5. Shareholders' Agreement: Key terms from the company's shareholders' agreement that apply to the grant
6. Tax Summary: Summary of key tax implications and requirements
7. Required Notices and Forms: Ƶ for any regulatory or company notices required
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