The Vesting Agreement Startup is a fundamental document in the Indian startup ecosystem, designed to align the interests of key stakeholders with the company's long-term success. This agreement becomes necessary when a startup wants to grant equity to founders, employees, or advisors while ensuring their continued commitment to the company's growth. It operates within the framework of Indian corporate law, particularly the Companies Act 2013 and SEBI regulations, providing a structured approach to equity distribution. The document typically includes detailed vesting schedules, performance milestones, provisions for different termination scenarios, and compliance with local regulatory requirements. It's particularly crucial in protecting company interests while offering equity incentives, especially in early-stage startups where human capital is a critical asset.
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1. Parties: Identifies the contracting parties - typically the company and the share recipient (employee/founder/advisor)
2. Background: Outlines the context of the agreement, including the company's structure and purpose of the vesting arrangement
3. Definitions: Defines key terms used throughout the agreement for clarity and legal certainty
4. Grant of Shares/Options: Details the number and type of shares/options being granted and their nominal value
5. Vesting Schedule: Specifies the vesting period, milestones, and how shares vest over time
6. Vesting Conditions: Outlines the conditions that must be met for shares to vest, including continued engagement with the company
7. Rights and Restrictions: Details the rights attached to the shares and any restrictions on their transfer or sale
8. Termination Provisions: Describes what happens to vested and unvested shares upon various types of termination
9. Company's Right of First Refusal: Establishes the company's priority rights to purchase shares if the holder wishes to sell
10. Representations and Warranties: Standard declarations by both parties about their capacity and authority to enter the agreement
11. Confidentiality: Provisions protecting company confidential information
12. Governing Law and Jurisdiction: Specifies that Indian law governs the agreement and establishes jurisdiction for disputes
13. General Provisions: Standard boilerplate clauses including notices, amendments, and severability
1. Accelerated Vesting: Provisions for accelerated vesting in case of specific events like company sale or IPO
2. Lock-in Period: Additional restrictions on share transfers for a specified period, often required for key employees or founders
3. Tag-Along Rights: Gives the share recipient the right to join in a sale if other shareholders are selling
4. Drag-Along Rights: Allows majority shareholders to force minority shareholders to join in a sale
5. Special Rights for Founders: Additional provisions specific to founder vesting arrangements
6. International Tax Provisions: Special clauses for recipients subject to foreign tax jurisdictions
7. Dispute Resolution: Detailed arbitration or mediation procedures if preferred over court jurisdiction
8. Non-Competition and Non-Solicitation: Restrictions on competitive activities and employee solicitation
1. Schedule 1 - Share Details: Detailed information about the shares/options including class, number, and nominal value
2. Schedule 2 - Vesting Schedule: Detailed breakdown of the vesting timeline and milestones
3. Schedule 3 - Deed of Adherence: Form of deed to be signed by the recipient accepting the terms of any shareholders' agreement
4. Schedule 4 - Company Capitalization Table: Current cap table showing all shareholders and their holdings
5. Schedule 5 - Taxation Worksheet: Details of tax implications and calculations for reference
6. Appendix A - Share Transfer Forms: Template forms for executing share transfers
7. Appendix B - Board Resolutions: Copies of relevant board resolutions approving the vesting arrangement
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