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Equity Agreement
I need an equity agreement for a startup company, outlining the distribution of shares among three co-founders, with vesting schedules and a clause for dilution protection. The agreement should also include provisions for decision-making authority and exit strategies.
What is an Equity Agreement?
An Equity Agreement sets out the terms and conditions for sharing ownership in a business or property between multiple parties in Ireland. It spells out who owns what percentage, how profits will be distributed, and what rights each owner has in making key decisions.
These contracts play a vital role in Irish startups and family businesses, where founders and investors need clear rules about their ownership stakes. A good agreement covers important details like share transfer restrictions, voting rights, and exit procedures - all while following Irish company law requirements and protecting everyone's interests.
When should you use an Equity Agreement?
Use an Equity Agreement when bringing new shareholders into your Irish business or restructuring ownership among existing ones. This becomes essential during funding rounds, when adding partners, or setting up employee share schemes - especially in fast-growing startups and family enterprises.
The timing is crucial: put the agreement in place before money changes hands or shares are issued. Common triggers include accepting venture capital, implementing KEEP (Key Employee Engagement Programme) schemes, or planning business succession. Having clear terms from the start prevents costly disputes and protects everyone's interests under Irish company law.
What are the different types of Equity Agreement?
- Simple Agreement For Equity: Basic agreement for early-stage investment, popular with Irish startups
- Phantom Stock Agreement: Gives employees benefits of stock ownership without actual shares
- Sweat Equity Agreement: Grants equity in exchange for work or services instead of cash
- Restricted Stock Award Agreement: Issues shares with conditions like vesting periods
- Equity Transfer Agreement: Handles the transfer of existing shares between parties
Who should typically use an Equity Agreement?
- Company Founders: Create and sign Equity Agreements when establishing ownership structures or bringing in new shareholders
- Business Partners: Use these agreements when joining forces or investing in Irish enterprises
- Venture Capitalists: Require formal equity documentation before investing in promising startups
- Corporate Lawyers: Draft and review agreements to ensure compliance with Irish company law
- Key Employees: Receive equity stakes through these agreements as part of compensation packages
- Family Business Members: Rely on these documents to formalize ownership during succession planning
How do you write an Equity Agreement?
- Company Details: Gather current shareholding structure, company registration number, and registered address
- Ownership Terms: Define exact percentages, share classes, and voting rights for each party
- Valuation Data: Document current company value and share price calculations
- Transfer Rules: Outline conditions for selling shares, including pre-emption rights
- Payment Details: Specify how and when equity payments or transfers will occur
- Vesting Schedule: Set clear timelines for share vesting if applicable
- Digital Platform: Use our template generator to ensure all Irish legal requirements are met and properly documented
What should be included in an Equity Agreement?
- Party Details: Full legal names, addresses, and company registration numbers of all shareholders
- Share Information: Precise description of share class, quantity, and nominal value
- Consideration: Clear terms of payment or value exchange for the equity
- Transfer Restrictions: Pre-emption rights and conditions for future share transfers
- Shareholder Rights: Voting powers, dividend rights, and management participation
- Dispute Resolution: Process for handling disagreements under Irish law
- Exit Provisions: Terms for company sale, IPO, or shareholder departure
- Execution Block: Signature sections, witness requirements, and company seal placement
What's the difference between an Equity Agreement and a Simple Agreement for Future Equity?
While both documents deal with ownership rights, an Equity Agreement differs significantly from a Simple Agreement for Future Equity (SAFE) in several key ways.
- Timing of Rights: Equity Agreements grant immediate ownership, while SAFEs promise future equity upon specific triggering events
- Valuation Requirements: Equity Agreements need a current company valuation, but SAFEs can be issued without determining present value
- Complexity Level: SAFEs are intentionally simpler documents designed for quick startup funding, while Equity Agreements contain more detailed terms and conditions
- Shareholder Status: Equity Agreement holders become immediate shareholders with voting rights; SAFE holders must wait for conversion events
- Legal Protection: Equity Agreements offer stronger immediate legal rights under Irish company law, whereas SAFEs provide more limited interim protections
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