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Employee Shareholder Agreement

Employee Shareholder Agreement Template for England and Wales

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Key Requirements PROMPT example:

Employee Shareholder Agreement

"I need an Employee Shareholder Agreement for our UK-based tech startup to issue 5,000 ordinary shares to our senior developer, with a 3-year vesting period and standard good/bad leaver provisions to be effective from March 2025."

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Document background
The Employee Shareholder Agreement was introduced following the Growth and Infrastructure Act 2013 as a flexible way for companies to offer equity participation to their workforce. This agreement type is particularly useful for growing companies wanting to attract and retain talent while managing their cash flow and fostering employee engagement. The document outlines the terms of share ownership, including voting rights, dividend entitlements, and transfer restrictions, while clearly stating which statutory employment rights are being exchanged for the shares. Under English and Welsh law, the agreement must ensure compliance with minimum share value requirements and include independent legal advice confirmation.
Suggested Sections

1. Parties: Identifying details of the company and employee shareholder

2. Background: Context of the agreement and employee shareholder arrangement

3. Definitions: Key terms used throughout the agreement

4. Share Issuance: Details of shares being issued including class, number, and value

5. Employment Status: Confirmation of employee shareholder status and rights waived

6. Share Rights: Voting rights, dividend rights, and other share-related provisions

7. Transfer Restrictions: Limitations on selling or transferring shares

8. Termination Provisions: What happens to shares upon employment termination

Optional Sections

1. Tag-Along Rights: Right to join in sale of shares by majority shareholders - used in companies with multiple shareholders where protection for minorities is desired

2. Drag-Along Rights: Obligation to join in sale of shares by majority shareholders - used when company wants to ensure clean exit possibilities

3. Share Vesting: Gradual acquisition of full share rights over time - used when implementing incentive-based share schemes

Suggested Schedules

1. Schedule 1: Share Certificate: Copy of share certificate or form of share certificate

2. Schedule 2: Articles of Association: Relevant excerpts from company's articles affecting these shares

3. Schedule 3: Statement of Rights Waived: Detailed list of employment rights being given up

4. Schedule 4: Valuation Certificate: Independent valuation of shares being issued

5. Appendix A: Share Transfer Form: Template form for future share transfers

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 Industries
Relevant Teams
Relevant Roles
Industries

Companies Act 2006: Primary legislation governing share capital, share transfers, and shareholder rights. Includes requirements for issuing shares and maintaining shareholder registers.

Growth and Infrastructure Act 2013: Introduced the employee shareholder status and amended the Employment Rights Act 1996 through Section 31.

Employment Rights Act 1996: Contains Section 205A on employee shareholder provisions, including rights being given up in exchange for shares and minimum share value requirements (at least £2,000).

Income Tax (Earnings and Pensions) Act 2003: Governs tax implications of share ownership and treatment of share-based benefits in employee shareholder arrangements.

Financial Services and Markets Act 2000: Relevant for financial services companies, containing requirements around share offerings and financial regulations.

Data Protection Act 2018 and UK GDPR: Legislation governing the handling and protection of personal data within the agreement.

Equality Act 2010: Ensures the agreement complies with anti-discrimination laws and provides equal treatment.

Small Business, Enterprise and Employment Act 2015: Contains provisions affecting share transfers and corporate transparency requirements.

Articles of Association: Company's constitutional document that sets out the rules for company operations and share dealings.

Existing Shareholders' Agreements: Any pre-existing agreements that may affect or need to be considered in the employee shareholder agreement.

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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