A Share Vesting Agreement is a document that enables a company to implement vesting conditions on certain shareholders’ shares. This agreement is to be used when the shares have already been issued in full and the company would like to add vesting conditions to those shares. If the vesting conditions are not met, the company has the right to ‘claw’ back the shares under this agreement. This document includes the details of the shareholder that the vesting applies to and the vesting criteria the Shareholder must satisfy.
When the requirements have been met and the shares are vested, the shareholder can retain them outright. There is no responsibility to sell these shares back to the company, even if the individual leaves the business. Vested share arrangements are an effective way for companies to encourage loyalty, help motivate co-founders to stay with a startup business and reassure investors that there is a long term commitment overall .
This Vesting Agreement will involve tax implications. It is highly recommended that you have a lawyer help you when selecting the appropriate legal documents and understanding their implications.
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