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Share Option Agreement

Share Option Agreement Template for South Africa

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Key Requirements PROMPT example:

Share Option Agreement

"I need a Share Option Agreement for our South African tech startup to grant options to key employees, with 4-year vesting starting March 2025 and including performance-based acceleration clauses for reaching specific revenue targets."

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Document background
The Share Option Agreement is a crucial document in South African corporate practice, used to structure equity-based incentives or investment opportunities. It provides a mechanism for companies to offer stakeholders the right to acquire shares at a predetermined price within a specific timeframe. This agreement type is commonly used for employee retention schemes, executive compensation packages, or as part of broader investment arrangements. The document must comply with South African legislation, including the Companies Act 71 of 2008, Income Tax Act, and Exchange Control Regulations. It typically includes detailed provisions on option grant, exercise conditions, vesting schedules, and tax implications, while addressing specific South African regulatory requirements such as BEE considerations and exchange control restrictions.
Suggested Sections

1. Parties: Identification of the company granting the options and the option holder

2. Background: Context of the option grant, including company status and purpose of the option arrangement

3. Definitions and Interpretation: Key terms used in the agreement, including 'Option Shares', 'Exercise Price', 'Exercise Period', etc.

4. Grant of Option: Formal grant of the option and its basic terms

5. Exercise Price: Specification of the price at which options can be exercised

6. Exercise Period: Timeframe during which the options may be exercised

7. Vesting Provisions: Schedule and conditions for option vesting

8. Exercise Mechanism: Process and requirements for exercising options

9. Lapse of Options: Circumstances under which options will lapse or be forfeited

10. Taxation: Tax implications and responsibilities

11. Transferability Restrictions: Limitations on transfer of options or resulting shares

12. Adjustment Provisions: Adjustments for corporate actions like splits or consolidations

13. Notices: Communication requirements between parties

14. General Provisions: Standard boilerplate clauses including governing law, jurisdiction, etc.

Optional Sections

1. Employment Conditions: Required for employee share option schemes, linking options to employment status

2. Performance Conditions: Include when options are subject to performance targets

3. Change of Control Provisions: Specific provisions for company sale or merger scenarios

4. Tag-Along Rights: Include for investor options where co-sale rights are relevant

5. Drag-Along Rights: Include where majority shareholders may force option holders to sell

6. Share Capital Reorganization: Detailed provisions for corporate restructuring impacts

7. Shareholder Rights: Rights of option holders prior to exercise

8. Exchange Control: Required when foreign option holders are involved

9. Competition and Confidentiality: Include for employee schemes to protect company interests

Suggested Schedules

1. Option Certificate: Formal certificate detailing the option grant

2. Exercise Notice: Template form for exercising options

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

4. Company Information: Key details about the company and its share capital

5. Shareholders Agreement Deed of Adherence: Form for option holders to join existing shareholders agreement

6. Fair Market Value Calculation: Methodology for determining share value

7. Tax Calculations: Examples of tax implications at various exercise points

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
Articles of Association
BEE
Board
Business Day
Change of Control
Companies Act
Company
Competitor
Confidential Information
Control
Date of Grant
Directors
Exercise Date
Exercise Notice
Exercise Period
Exercise Price
Fair Market Value
Financial Year
Good Leaver
Group
Group Company
Initial Public Offering
JSE
Listing
MOI
Option
Option Certificate
Option Holder
Option Shares
Ordinary Shares
Performance Conditions
Poor Leaver
Prohibited Activities
Related Party
Relevant Transfer
SARB
Securities
Share Capital
Share Option Plan
Shareholders Agreement
Shares
Subsidiary
Takeover Offer
Termination Date
Transfer
Trigger Event
Vesting Date
Vesting Period
Vesting Schedule
Clauses
Option Grant
Exercise Rights
Vesting
Price and Payment
Transfer Restrictions
Lapse of Options
Adjustment Rights
Confidentiality
Non-Competition
Taxation
Exchange Control
Corporate Actions
Share Rights
Termination
Performance Conditions
BEE Compliance
Tag-Along Rights
Drag-Along Rights
Information Rights
Representations and Warranties
Assignment
Notices
Dispute Resolution
Governing Law
Entire Agreement
Amendment
Severability
Share Capital Reorganization
Good Leaver/Bad Leaver
Change of Control
Relevant Industries

Technology

Financial Services

Manufacturing

Mining

Retail

Professional Services

Healthcare

Telecommunications

Energy

Real Estate

Agriculture

Education

Media and Entertainment

Construction

Transportation and Logistics

Relevant Teams

Legal

Human Resources

Finance

Compliance

Corporate Secretariat

Executive Management

Board

Tax

Risk Management

Employee Benefits

Corporate Development

Investment

Relevant Roles

CEO

CFO

Legal Counsel

HR Director

Company Secretary

Financial Director

Compensation Manager

Investment Manager

Corporate Lawyer

Tax Manager

Compliance Officer

Board Member

Executive Director

HR Manager

Employee Benefits Manager

Share Scheme Administrator

Corporate Finance Manager

Risk Manager

Industries
Companies Act 71 of 2008: Governs company formation, share capital structure, and rights attached to shares. Crucial for ensuring the share option agreement complies with requirements for share issuance and transfer.
Income Tax Act 58 of 1962: Addresses the tax implications of share options, including provisions for taxation at grant, vesting, and exercise of options. Section 8C specifically deals with taxation of equity instruments.
Financial Markets Act 19 of 2012: Relevant if the shares are listed on an exchange, governing securities trading and market regulation.
Exchange Control Regulations: Regulates cross-border transactions and foreign ownership of South African shares, particularly relevant if foreign parties are involved.
Employment Equity Act 55 of 1998: If the share options are part of employee compensation, ensures compliance with employment equity requirements and non-discrimination provisions.
Consumer Protection Act 68 of 2008: May apply to certain aspects of the agreement, particularly regarding fairness of terms and clarity of documentation.
Protection of Personal Information Act 4 of 2013 (POPIA): Ensures proper handling of personal information of parties involved in the share option agreement.
Financial Intelligence Centre Act 38 of 2001: Relevant for KYC (Know Your Customer) requirements and anti-money laundering compliance when transferring shares.
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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