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Founder Vesting Agreement

Founder Vesting Agreement Template for United Arab Emirates

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Key Requirements PROMPT example:

Founder Vesting Agreement

Need a Founder Vesting Agreement for our UAE-based technology startup with a 4-year vesting period starting January 2025, including a 1-year cliff and acceleration provisions in case of acquisition.

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Document background
The Founder Vesting Agreement is a crucial document used in UAE companies, particularly startups and growing businesses, to align founder and company interests over an extended period. It establishes a structured framework where founders earn their equity over time or upon achieving specific milestones, rather than receiving it all upfront. This approach helps protect the company and other stakeholders while incentivizing long-term founder commitment. The agreement must comply with UAE Federal Law No. 32 of 2021 (Companies Law) and related regulations, including specific free zone requirements if applicable. It typically includes detailed vesting schedules, provisions for early departure scenarios, share transfer restrictions, and mechanisms for handling unvested shares. The document is particularly important in venture-backed companies or when multiple founders are involved, providing clarity and security for all parties while ensuring compliance with local legal requirements.
Suggested Sections

1. Parties: Identification of the company, the founder(s), and any other relevant parties such as shareholders or trustees

2. Background: Context of the agreement, including company formation, founder's role, and purpose of the vesting arrangement

3. Definitions: Key terms used throughout the agreement including Vesting Period, Vesting Date, Shares, Clawback, Good Leaver, Bad Leaver, etc.

4. Share Allocation: Details of the total shares subject to vesting, including class of shares and nominal value

5. Vesting Schedule: Detailed timeline and conditions for the vesting of shares, including cliff period if applicable

6. Vesting Conditions: Specific requirements that must be met for shares to vest, including continued employment/service

7. Transfer Restrictions: Limitations on the founder's ability to transfer, pledge or encumber unvested shares

8. Termination Provisions: Consequences of termination of employment/service, including Good Leaver and Bad Leaver provisions

9. Company's Rights: Company's rights regarding unvested shares, including repurchase rights and price

10. Founder's Obligations: Ongoing commitments and responsibilities of the founder during the vesting period

11. Tax Implications: Acknowledgment and handling of tax consequences related to the vesting of shares

12. Confidentiality: Obligations regarding confidential information and trade secrets

13. Governing Law and Jurisdiction: Specification of UAE law as governing law and relevant courts for dispute resolution

14. General Provisions: Standard boilerplate clauses including amendments, notices, and severability

Optional Sections

1. Milestone-Based Vesting: Used when vesting is tied to specific performance metrics or company milestones rather than time-based only

2. Accelerated Vesting: Included when there are provisions for acceleration of vesting upon certain events like change of control

3. Tag-Along Rights: Optional protection for minority shareholders in case of sale of majority stake

4. Drag-Along Rights: Included when majority shareholders want the right to force minority shareholders to join in the sale of the company

5. Intellectual Property Rights: Additional section when the founder is involved in technical development or IP creation

6. Non-Competition and Non-Solicitation: Added when additional restrictions on founder's activities are required

7. Shareholder Rights: Included when specific voting or dividend rights need to be addressed

8. Board Representation: Used when founder is guaranteed board position during vesting period

Suggested Schedules

1. Schedule 1 - Share Details: Detailed breakdown of share allocation, including share certificate numbers and share class details

2. Schedule 2 - Vesting Schedule: Detailed timetable showing vesting dates and percentages of shares vesting at each date

3. Schedule 3 - Milestone Criteria: If applicable, detailed description of milestones that trigger vesting events

4. Schedule 4 - Company Valuation: Agreed valuation metrics for share pricing in case of repurchase

5. Schedule 5 - Deed of Adherence: Template for additional parties to join the agreement if required

6. Appendix A - Share Transfer Form: Template form for executing share transfers

7. Appendix B - Board Resolutions: Pro-forma board resolutions required for implementing the vesting arrangement

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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alex.den.21@genieai.co
Relevant legal definitions
Agreement
Articles of Association
Bad Leaver Event
Board
Business Day
Change of Control
Cliff Period
Company
Competitor
Confidential Information
Corporate Documents
Deed of Adherence
Director
Effective Date
Encumbrance
Fair Market Value
Financial Year
Founder
Good Leaver Event
Governing Law
Initial Public Offering
Intellectual Property Rights
Material Breach
Milestone
Notice
Purchase Price
Repurchase Notice
Repurchase Right
Reserved Matters
Restricted Business
Share Certificate
Shareholders
Shares
Subsidiary
Tax
Territory
Transfer
Trustee
UAE
Unvested Shares
Vested Shares
Vesting Commencement Date
Vesting Period
Vesting Schedule
Clauses
Share Allocation
Vesting Schedule
Vesting Conditions
Share Transfer Restrictions
Repurchase Rights
Good Leaver Provisions
Bad Leaver Provisions
Accelerated Vesting
Change of Control
Confidentiality
Non-Competition
Non-Solicitation
Intellectual Property Rights
Board Representation
Voting Rights
Dividend Rights
Tag-Along Rights
Drag-Along Rights
Termination
Death and Disability
Tax Obligations
Representations and Warranties
Dispute Resolution
Governing Law
Amendment
Assignment
Notices
Severability
Entire Agreement
Further Assurance
Costs
Force Majeure
Counterparts
Relevant Industries

Technology

E-commerce

Financial Services

Healthcare

Education Technology

Software Development

Professional Services

Consulting

Media and Entertainment

Real Estate Technology

Biotechnology

Renewable Energy

Retail Technology

Manufacturing

Telecommunications

Relevant Teams

Legal

Corporate Governance

Board of Directors

Executive Leadership

Human Resources

Finance

Company Secretariat

Compliance

Investment

Strategy

Relevant Roles

Chief Executive Officer

Founder

Co-Founder

Chief Technology Officer

Chief Financial Officer

Chief Operating Officer

Managing Director

Board Member

Company Secretary

General Counsel

Legal Director

Corporate Lawyer

Investment Manager

Venture Capital Partner

Startup Advisor

Executive Director

Industries
UAE Federal Law No. 32 of 2021 (Companies Law): The primary legislation governing companies in the UAE, including provisions for share ownership, transfer restrictions, and corporate governance requirements
UAE Federal Law No. 33 of 2021 (Commercial Companies Law): Regulates commercial companies and includes provisions relevant to shareholding structures and corporate governance
UAE Federal Law No. 8 of 1980 (UAE Labor Law): Relevant for defining the employment relationship aspects of founders who also serve as executives
UAE Federal Law No. 2 of 2015 (Commercial Companies Law amendments): Contains specific provisions regarding share transfers and restrictions in private companies
UAE Central Bank Resolution 28/2 of 2001: Regulations regarding financial arrangements and securities in private companies
UAE Federal Law No. 18 of 1993 (Commercial Transactions Law): Governs commercial transactions and contractual obligations between parties
UAE Civil Code (Federal Law No. 5 of 1985): Provides general principles of contract law and obligations that apply to vesting agreements
Relevant Free Zone Regulations: If the company is established in a free zone, specific regulations of that free zone regarding share ownership and transfer must be considered
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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