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Phantom Shares Agreement

Phantom Shares Agreement Template for Malaysia

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Key Requirements PROMPT example:

Phantom Shares Agreement

"I need a Phantom Shares Agreement under Malaysian law for our tech startup's CTO, granting 5,000 phantom shares with a 3-year vesting period starting March 1, 2025, and including special provisions for a potential IPO."

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Document background
The Phantom Shares Agreement is a strategic compensation instrument used by Malaysian companies to align employee interests with company performance without diluting actual shareholding. This document type is particularly relevant for private companies, subsidiaries of foreign corporations, or organizations seeking to maintain specific shareholding structures while still offering competitive, equity-like incentives. The agreement, governed by Malaysian law, typically includes detailed provisions on grant terms, vesting conditions, valuation methodologies, and payment triggers. It must comply with the Companies Act 2016, relevant securities regulations, and Malaysian employment laws. The document is commonly used for key employee retention, performance incentivization, and as part of comprehensive compensation packages in the Malaysian market.
Suggested Sections

1. Parties: Identifies the company and the recipient of the phantom shares

2. Background: Explains the context and purpose of the phantom shares grant

3. Definitions: Defines key terms including Phantom Shares, Fair Market Value, Vesting Date, Payment Event, etc.

4. Grant of Phantom Shares: Details the number of phantom shares granted and basic terms of the grant

5. Vesting Schedule: Specifies when and how the phantom shares will vest over time

6. Valuation: Defines how the phantom shares will be valued, including calculation methodology

7. Payment Events and Process: Specifies circumstances triggering payment and the payment process

8. Termination Provisions: Outlines what happens to phantom shares upon various types of employment termination

9. Tax Provisions: Addresses tax implications and responsibilities for both parties

10. Confidentiality: Confidentiality obligations regarding the agreement terms and company information

11. General Provisions: Standard contract clauses including governing law, amendments, notices, etc.

Optional Sections

1. Non-Compete and Non-Solicitation: Restrictive covenants - include when the phantom shares value is significant or for senior employees

2. Change of Control Provisions: Special provisions for company sale or merger - include for companies considering future M&A

3. Foreign Currency Provisions: Include when payments might be made in different currencies

4. Clawback Provisions: Include for senior executives or when required by corporate governance

5. Anti-Dilution Provisions: Include when phantom shares are tied to actual share value and company anticipates capital structure changes

6. Employee Acknowledgments: Additional representations by employee - include for jurisdictions requiring explicit acceptance of terms

Suggested Schedules

1. Vesting Schedule: Detailed breakdown of vesting dates and conditions

2. Valuation Methodology: Detailed explanation of how phantom share value will be calculated

3. Payment Calculation Examples: Examples showing how payments will be calculated in various scenarios

4. Corporate Approvals: Copies of board resolutions or other corporate approvals for the phantom share program

5. Tax Treatment Summary: Summary of tax implications and treatment in relevant jurisdictions

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 Industries

Technology

Financial Services

Professional Services

Manufacturing

Real Estate

Healthcare

Retail

Telecommunications

Energy

Construction

Education

Consulting

Relevant Teams

Human Resources

Legal

Finance

Executive Management

Company Secretarial

Compensation & Benefits

Corporate Governance

Risk Management

Talent Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Managing Director

Senior Executive

Department Head

Regional Manager

Key Account Manager

Technical Lead

Senior Engineer

Principal Consultant

Business Unit Director

Country Manager

Vice President

Senior Manager

Research Director

Industries
Companies Act 2016: Primary legislation governing company operations in Malaysia, relevant for corporate governance and share-related matters, including the creation and administration of phantom share plans
Capital Markets and Services Act 2007: Regulates securities and financial instruments in Malaysia - relevant as phantom shares may be considered securities products requiring compliance with specific regulations
Employment Act 1955: Governs employment relationships in Malaysia - relevant for phantom shares as they are typically part of employee compensation packages
Income Tax Act 1967: Crucial for determining tax treatment of phantom share payments, including when and how payments are taxed for both employer and employee
Contracts Act 1950: Provides the legal framework for contract formation and enforcement in Malaysia, essential for the validity and enforceability of the phantom shares agreement
Securities Commission Malaysia Guidelines on Employee Share Schemes: Regulatory guidelines that may apply to phantom share schemes, particularly regarding disclosure and administration requirements
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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