Shadow Equity Agreement Template for New Zealand

The Shadow Equity Agreement is designed for New Zealand companies seeking to implement alternative equity compensation structures without diluting existing shareholdings. This document is particularly valuable for start-ups, high-growth companies, and established businesses looking to attract and retain key talent while maintaining their current corporate structure. The agreement details the terms of synthetic equity rights, including calculation methods, vesting conditions, and payment triggers, all while ensuring compliance with New Zealand's Companies Act 1993, Financial Markets Conduct Act 2013, and relevant tax legislation. It's commonly used when traditional share schemes are impractical due to corporate structure, shareholder restrictions, or strategic considerations. The document includes comprehensive provisions for valuation, information rights, and exit scenarios, making it suitable for both early-stage companies and established enterprises.

1. Parties: Identifies the company and the shadow equity holder

2. Background: Sets out the context and purpose of the agreement, including the company's intention to grant synthetic equity rights

3. Definitions and Interpretation: Defines key terms including Shadow Equity, Trigger Events, Valuation Method, and other critical concepts

4. Grant of Shadow Equity Rights: Details the specific grant, including the percentage or units of shadow equity being awarded

5. Nature of Rights: Clearly states these are synthetic rights, not actual equity, and specifies what rights are not included

6. Calculation of Value: Specifies how the shadow equity will be valued in different circumstances

7. Payment Triggers and Mechanics: Defines events that trigger payment and how payments will be made

8. Vesting Schedule: Details the vesting timeline and conditions for the shadow equity rights

9. Information Rights: Specifies what company information the holder is entitled to receive

10. Confidentiality: Protects company confidential information

11. Tax Provisions: Addresses tax treatment and responsibilities

12. Termination: Sets out circumstances for termination and consequences

13. General Provisions: Standard boilerplate clauses including notices, amendments, governing law