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Phantom Shares Agreement

Phantom Shares Agreement Template for Netherlands

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Key Requirements PROMPT example:

Phantom Shares Agreement

"I need a Phantom Shares Agreement for our Dutch tech startup to grant phantom shares to our senior developers, with quarterly vesting over 4 years starting March 2025, and special provisions for accelerated vesting in case of an IPO."

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Document background
The Phantom Shares Agreement is a strategic instrument used by companies operating under Dutch law to create long-term incentive programs for key employees or contractors without diluting actual shareholding. This document type is particularly valuable for private companies, subsidiaries of international groups, or organizations with restricted share structures. The agreement establishes a contractual right to receive cash payments based on the company's share value appreciation, effectively simulating share ownership benefits. It typically includes detailed provisions for vesting schedules, valuation mechanisms, exercise procedures, and payment terms, all structured to comply with Dutch corporate, employment, and tax regulations. The Phantom Shares Agreement is especially useful when actual share transfers are impractical due to corporate structure, shareholder restrictions, or cross-border complications.
Suggested Sections

1. Parties: Identification of the company issuing the phantom shares and the recipient (usually an employee or contractor)

2. Background: Context of the agreement, including the company's phantom share program and its purpose

3. Definitions: Key terms used throughout the agreement, including 'Phantom Shares', 'Exercise Price', 'Vesting Date', 'Exit Event', etc.

4. Grant of Phantom Shares: Details of the phantom shares being granted, including number of units and grant date

5. Vesting Provisions: Schedule and conditions under which the phantom shares will vest

6. Valuation Mechanism: Method for determining the value of phantom shares, including frequency of valuations and calculation basis

7. Exercise Rights: Conditions and procedure for exercising phantom shares

8. Payment Terms: Terms governing how and when payments will be made upon exercise

9. Termination Provisions: Effects of employment termination on phantom share rights

10. Tax Provisions: Treatment of tax obligations and responsibilities

11. Confidentiality: Obligations regarding confidential information related to the phantom shares and company

12. Assignment and Transfer: Restrictions on transfer or assignment of phantom share rights

13. Governing Law and Jurisdiction: Specification of Dutch law as governing law and jurisdiction for disputes

14. Entire Agreement: Standard integration clause confirming the agreement represents the entire understanding between parties

Optional Sections

1. Change of Control Provisions: Include when specific provisions are needed for company sale or merger scenarios

2. Anti-dilution Protection: Include when protection against share dilution events is desired

3. Bad Leaver Provisions: Include when different treatment is desired for termination due to misconduct

4. Good Leaver Provisions: Include when specific provisions are needed for retirement or disability scenarios

5. Non-Competition and Non-Solicitation: Include when additional restrictive covenants are desired

6. Drag-Along Rights: Include when phantom shareholders should be required to participate in certain corporate transactions

7. Alternative Dispute Resolution: Include when parties prefer mediation or arbitration over court proceedings

8. Currency Conversion: Include for international employees when payments may be made in different currencies

Suggested Schedules

1. Schedule 1 - Participant Information: Personal details of the phantom share recipient and specific grant details

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

3. Schedule 3 - Valuation Formula: Detailed methodology for calculating phantom share value

4. Schedule 4 - Exercise Notice Form: Template form for exercising phantom shares

5. Schedule 5 - Tax Calculation Examples: Illustrative examples of tax treatment in different scenarios

6. Appendix A - Company Phantom Share Plan: Copy or summary of the overall company phantom share plan

7. Appendix B - Relevant Corporate Approvals: Copies of board resolutions or other corporate approvals for the phantom share grant

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
Affiliate
Base Value
Board
Business Day
Cause
Change of Control
Company
Competitor
Confidential Information
Corporate Transaction
Disability
Effective Date
Eligible Employee
Exercise Date
Exercise Notice
Exercise Period
Exercise Price
Exit Event
Fair Market Value
Financial Year
Good Leaver
Grant Date
Group
Holding Period
Initial Public Offering
IPO
Market Value
Notice
Parent Company
Participant
Payment Date
Performance Conditions
Phantom Share
Phantom Share Plan
Plan Administrator
Reference Price
Retirement
Sale Event
Settlement Amount
Settlement Date
Share
Share Value
Shareholders
Subsidiary
Tax
Termination Date
Transfer
Valuation Date
Valuation Mechanism
Vest
Vesting Date
Vesting Period
Vesting Schedule
Works Council
Relevant Industries

Technology

Financial Services

Professional Services

Manufacturing

Healthcare

Retail

Energy

Telecommunications

Real Estate

Construction

Media and Entertainment

Software and IT

Consulting

Relevant Teams

Human Resources

Legal

Finance

Executive Leadership

Compensation & Benefits

Corporate Governance

Tax

Payroll

Corporate Strategy

Board Secretariat

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer

Senior Manager

Department Head

Director

Vice President

Senior Developer

Key Account Manager

Sales Executive

Technical Lead

Principal Consultant

Regional Manager

Country Manager

Senior Advisor

Executive Board Member

Managing Partner

Industries
Dutch Civil Code (Burgerlijk Wetboek) - Book 2: Contains provisions regarding legal entities and corporate structures, relevant for establishing the framework within which phantom shares operate
Dutch Civil Code (Burgerlijk Wetboek) - Book 6: Covers general contract law provisions which are essential for the contractual nature of phantom share agreements
Dutch Income Tax Act 2001 (Wet inkomstenbelasting): Governs the taxation of phantom shares as employment benefits and their treatment for income tax purposes
Dutch Wage Tax Act 1964 (Wet op de loonbelasting): Relevant for determining how phantom shares are treated for wage tax purposes when provided as part of employment compensation
Works Councils Act (Wet op de ondernemingsraden): May be relevant if the phantom shares plan affects a substantial portion of employees, requiring works council consultation
Financial Supervision Act (Wet op het financieel toezicht): Relevant for ensuring the phantom shares arrangement doesn't inadvertently create a regulated financial instrument
General Data Protection Regulation (GDPR/AVG): Applicable for handling personal data of phantom share participants and maintaining participant records
Equal Treatment Act (Algemene wet gelijke behandeling): Ensures the phantom shares program doesn't discriminate unfairly between different categories of employees
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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