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Sweat Equity Term Sheet

Sweat Equity Term Sheet Generator for United Arab Emirates

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Key Requirements PROMPT example:

Sweat Equity Term Sheet

"I need a Sweat Equity Term Sheet for a UAE-based technology startup, offering our new CTO 15% equity vesting over 3 years in exchange for full-time technical leadership and development services, with first vesting date in January 2025."

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Document background
The Sweat Equity Term Sheet is a critical document used in the UAE business environment when companies wish to compensate individuals or entities with equity in exchange for their services, expertise, or work contribution. This document is particularly relevant for startups, growth-stage companies, and professional service firms operating under UAE jurisdiction. It must comply with UAE Federal Law No. 32 of 2021 and related regulations, including free zone specific requirements where applicable. The term sheet typically precedes more detailed agreements and outlines key terms such as equity percentage, vesting schedule, service scope, valuation methodology, and shareholder rights. It's essential to consider UAE-specific requirements regarding minimum capital, foreign ownership restrictions, and local business regulations when drafting this document.
Suggested Sections

1. Parties: Identification of the Company and the Service Provider/Sweat Equity Participant

2. Background: Context of the arrangement and brief description of the company and service provider's expertise

3. Definitions: Key terms used throughout the term sheet

4. Services: Detailed description of the services to be provided by the service provider

5. Equity Grant: Details of the equity stake to be granted, including percentage, class of shares, and vesting schedule

6. Valuation: Agreed valuation methodology for both the services and the equity stake

7. Vesting Terms: Timeline and conditions for vesting of the equity stake

8. Rights and Restrictions: Voting rights, dividend rights, and any restrictions on the equity stake

9. Confidentiality: Confidentiality obligations of both parties

10. Governing Law: Specification of UAE law as governing law and relevant jurisdiction

Optional Sections

1. Board Representation: Terms regarding board seat or observer rights, if applicable for larger equity stakes

2. Tag-Along Rights: Right to join in sale of shares by other shareholders, included for minority shareholder protection

3. Drag-Along Rights: Obligation to join in sale of shares, included when majority shareholders want exit flexibility

4. Anti-Dilution Protection: Protection against dilution in future funding rounds, if applicable

5. Non-Compete Provisions: Restrictions on competitive activities, if required

6. Intellectual Property Rights: IP assignment and protection clauses, essential for technology or creative services

7. Performance Metrics: Specific KPIs or milestones for equity vesting, if performance-based

Suggested Schedules

1. Schedule 1 - Services Description: Detailed scope of services to be provided

2. Schedule 2 - Vesting Schedule: Detailed breakdown of vesting timeline and conditions

3. Schedule 3 - Valuation Methodology: Detailed explanation of how services and equity are valued

4. Schedule 4 - Shareholders' Rights: Detailed description of rights attached to the equity stake

5. Appendix A - Key Performance Indicators: Specific metrics for performance-based vesting, if applicable

6. Appendix B - Company Information: Key company details and current capitalization table

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

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Business Day
Company
Completion Date
Confidential Information
Effective Date
Equity Interest
Fair Market Value
Fully Diluted Share Capital
Good Leaver
Bad Leaver
Intellectual Property Rights
Key Performance Indicators
Material Breach
Milestones
Ordinary Shares
Party/Parties
Service Provider
Services
Share Capital
Shareholders
Shareholders' Agreement
Sweat Equity
Term
Termination Date
Unvested Shares
Valuation
Vested Shares
Vesting Date
Vesting Period
Vesting Schedule
Working Hours
Board of Directors
Business Plan
Competitor
Definitive Agreements
Exit Event
Free Zone
Governing Law
Performance Criteria
Restricted Activities
Service Agreement
UAE
Voting Rights
Clauses
Services Scope
Equity Grant
Vesting
Valuation
Share Rights
Board Representation
Confidentiality
Non-Competition
Non-Solicitation
Intellectual Property
Performance Requirements
Term and Termination
Exit Rights
Tag-Along Rights
Drag-Along Rights
Right of First Refusal
Pre-emptive Rights
Transfer Restrictions
Representations and Warranties
Governing Law
Dispute Resolution
Notices
Assignment
Amendment
Severability
Entire Agreement
Force Majeure
Costs and Expenses
Shareholder Approval
Regulatory Compliance
Deadlock Resolution
Good/Bad Leaver Provisions
Anti-Dilution Protection
Information Rights
Relevant Industries

Technology

Professional Services

Consulting

Software Development

Digital Media

E-commerce

Financial Technology

Healthcare Technology

Real Estate

Marketing and Advertising

Business Services

Creative Industries

Relevant Teams

Legal

Finance

Human Resources

Executive Leadership

Corporate Development

Business Development

Strategy

Operations

Relevant Roles

CEO

Founder

Co-Founder

Chief Technology Officer

Chief Financial Officer

Legal Counsel

Business Development Director

Technical Advisor

Strategic Consultant

Creative Director

Software Architect

Product Manager

Management Consultant

Investment Manager

Startup Advisor

Industries
UAE Federal Law No. 32 of 2021 (Commercial Companies Law): Governs company formation, share capital requirements, and equity arrangements in UAE companies. Essential for structuring sweat equity deals and ensuring compliance with shareholding requirements.
UAE Federal Law No. 33 of 2021 (Labor Law): Regulates employment relationships and labor rights. Relevant for defining the service component of sweat equity arrangements and ensuring compliance with employment regulations.
UAE Federal Law No. 18 of 1993 (Commercial Transactions Law): Provides framework for commercial transactions and business dealings. Important for general commercial principles affecting the term sheet.
UAE Federal Law No. 5 of 1985 (Civil Code): Contains fundamental principles of contract law and obligations. Crucial for the basic structure and enforceability of the term sheet.
Federal Decree-Law No. 9 of 2022 on Corporate Tax: Relevant for tax implications of sweat equity arrangements and valuation of services rendered.
Federal Decree-Law No. 8 of 2017 on Value Added Tax: Important for determining VAT implications on the value of services provided under sweat equity arrangements.
DIFC/ADGM Free Zone Regulations: If the company is established in a free zone, specific regulations regarding equity arrangements and company structure 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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