Equity Split Agreement Template for England and Wales

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Key Requirements PROMPT example:

Equity Split Agreement

"I need an Equity Split Agreement for my London-based tech startup to divide ownership between three co-founders, with a 40-30-30 split and quarterly vesting over two years starting January 2025."

Document background
An Equity Split Agreement is essential when establishing or restructuring ownership in a business venture under English and Welsh law. This document is commonly used during company formation, when bringing in new co-founders, or implementing employee equity schemes. The agreement details crucial aspects such as ownership percentages, vesting conditions, and shareholder rights. It provides legal certainty and helps prevent future disputes by clearly documenting the agreed terms of equity distribution. The document must comply with the Companies Act 2006 and other relevant UK legislation.
Suggested Sections

1. Parties: Identification and details of all parties involved in the equity split

2. Background: Context and purpose of the agreement

3. Definitions: Key terms used throughout the agreement

4. Equity Structure: Details of share distribution and ownership percentages

5. Consideration: What is being exchanged for the equity

6. Transfer Restrictions: Limitations on selling or transferring shares

Optional Sections

1. Vesting Schedule: Provisions for gradual release of equity over time, typically used for founder or employee equity arrangements

2. Tag-Along Rights: Provisions giving minority shareholders the right to join in sale of shares on same terms as majority shareholders

3. Drag-Along Rights: Provisions allowing majority shareholders to force minority shareholders to join in sale, typically used for exit flexibility

4. Anti-dilution Provisions: Protective provisions against ownership dilution, commonly used in early-stage investments

Suggested Schedules

1. Schedule 1 - Cap Table: Current and proposed shareholding structure showing all shareholders and their respective ownership percentages

2. Schedule 2 - Vesting Schedule: Detailed timeline and conditions for the release of equity over time

3. Schedule 3 - Share Valuation: Independent valuation or agreed value of shares, including methodology used

4. Schedule 4 - Shareholders' Rights: Comprehensive description of rights attached to different share classes and categories of shareholders

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

Relevant Industries
Relevant Teams
Relevant Roles
Industries

Companies Act 2006: Primary legislation governing company formation, share capital, directors' duties, and shareholder rights. Key for share transfer provisions and corporate governance requirements.

Financial Services and Markets Act 2000: Regulates financial services and markets in the UK. Relevant for regulated activities and securities regulations in equity arrangements.

Small Business, Enterprise and Employment Act 2015: Contains transparency requirements and PSC (People with Significant Control) regulations affecting share ownership and control.

Income Tax Act 2007: Tax legislation governing the income tax implications of equity distributions and share-based payments.

Corporation Tax Act 2010: Deals with corporate tax implications of equity arrangements and share transfers within company structures.

Taxation of Chargeable Gains Act 1992: Covers capital gains tax implications for share transfers and disposals of equity interests.

Employment Rights Act 1996: Relevant when equity splits are part of employment arrangements or compensation packages.

Equality Act 2010: Ensures non-discrimination in equity distribution, particularly relevant for employee share schemes.

Common Law Principles: Fundamental legal principles regarding contract formation, fiduciary duties, and partnership law applicable to equity arrangements.

Articles of Association: Company's constitutional document that must be considered to ensure compatibility with any equity split arrangement.

GDPR and Data Protection Act 2018: Regulations governing the handling of personal data in the context of equity arrangements and shareholder information.

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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