Vesting Agreement Startup Template for India

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Key Requirements PROMPT example:

Vesting Agreement Startup

"I need a Vesting Agreement Startup for our India-based technology company that implements a 4-year vesting schedule with a 1-year cliff for our three co-founders, with accelerated vesting provisions in case of acquisition."

Document background
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.
Suggested Sections

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

Optional Sections

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

Suggested Schedules

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

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 legal definitions
Clauses
Relevant Industries

Technology

E-commerce

Financial Technology

Healthcare Technology

Software Development

Biotechnology

Artificial Intelligence

Clean Technology

Education Technology

Digital Media

Consumer Internet

Enterprise Software

Mobile Applications

Retail Technology

Professional Services

Relevant Teams

Legal

Human Resources

Executive Leadership

Board of Directors

Corporate Governance

Finance

Company Secretarial

Compliance

Operations

Relevant Roles

CEO

Founder

Co-founder

CTO

CFO

Lead Developer

Senior Software Engineer

Product Manager

Technical Architect

Head of Operations

Chief Marketing Officer

VP of Sales

Director of Engineering

Senior Business Analyst

Head of HR

Legal Counsel

Company Secretary

Board Member

Advisory Board Member

Department Head

Industries
Companies Act, 2013: Primary legislation governing company formation, share issuance, transfer of securities, and corporate governance in India. Relevant for structuring the vesting agreement's share allocation mechanisms.
Securities and Exchange Board of India (SEBI) Act, 1992: Regulates securities market and protects investor interests. Relevant for ensuring compliance with securities regulations when implementing equity-based vesting arrangements.
Income Tax Act, 1961: Governs taxation of equity instruments, including tax implications of vested shares and their transfer. Particularly relevant for understanding tax obligations related to equity compensation.
Indian Contract Act, 1872: Fundamental law governing contract formation and enforcement in India. Essential for ensuring the vesting agreement meets basic contract law requirements.
Startup India Initiative Guidelines: Government policy framework providing specific considerations and benefits for startups, including provisions related to employee stock options and equity distribution.
SEBI (Share Based Employee Benefits) Regulations, 2014: Specific regulations governing employee stock options and other share-based benefits, crucial for structuring vesting arrangements.
Foreign Exchange Management Act (FEMA), 1999: Relevant if the startup has foreign investors or if shares might be vested to non-resident individuals, governing cross-border equity transactions.
Information Technology Act, 2000: Particularly relevant for technology startups, governing digital records and electronic execution of agreements.
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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