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Phantom Share Agreement

Phantom Share Agreement Template for Germany

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Key Requirements PROMPT example:

Phantom Share Agreement

"I need a Phantom Share Agreement for our German tech startup to grant synthetic equity to our new CTO starting March 2025, with 4-year vesting and specific provisions for an anticipated IPO within the next 5 years."

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Document background
The Phantom Share Agreement serves as a crucial instrument in German corporate practice for companies seeking to implement long-term incentive programs without diluting actual shareholding. This document type is particularly valuable for private companies, subsidiaries of foreign corporations, and organizations where direct share ownership is impractical or undesirable. The agreement defines the issuance of phantom shares, which are contractual rights mimicking the economic benefits of actual share ownership, while complying with German corporate, employment, and tax laws. It includes essential provisions for vesting schedules, valuation mechanisms, payment triggers, and tax treatment, making it suitable for various corporate structures and compensation strategies. The Phantom Share Agreement is especially relevant in the German market where traditional share-based compensation can face regulatory hurdles and complex implementation requirements.
Suggested Sections

1. Parties: Identification of the company granting the phantom shares and the beneficiary

2. Background: Context of the phantom share grant, including the purpose of the agreement and relationship between parties

3. Definitions: Key terms including Phantom Shares, Reference Share, Valuation Date, Exit Event, and other technical terms

4. Grant of Phantom Shares: Number of phantom shares granted and their relationship to actual shares

5. Vesting Provisions: Vesting schedule and conditions for the phantom shares

6. Valuation Mechanism: Method for determining the value of phantom shares, including calculation formulas

7. Payment Terms: Conditions and timing of payments, including trigger events

8. Term and Termination: Duration of the agreement and circumstances for early termination

9. Confidentiality: Obligations regarding confidential information

10. Tax Provisions: Handling of tax obligations and withholding requirements

11. Governing Law and Jurisdiction: Specification of German law application and competent courts

Optional Sections

1. Good Leaver/Bad Leaver Provisions: Used when different treatment is desired based on circumstances of employment termination

2. Change of Control Provisions: Include when specific treatment of phantom shares is desired in case of company sale or merger

3. Non-Competition Clause: Added when restrictions on competitive activities are desired

4. Works Council Approval: Required when works council has co-determination rights in the program

5. Malus and Clawback: Include for ability to reduce or reclaim payments in specific circumstances

6. Currency Conversion: Needed if payments might be made in currency other than EUR

7. Alternative Dispute Resolution: Optional mediation or arbitration provisions

Suggested Schedules

1. Vesting Schedule: Detailed timeline and conditions for vesting of phantom shares

2. Valuation Formula: Technical details of how phantom share value is calculated

3. Notice Forms: Template forms for various notifications required under the agreement

4. Tax Treatment Overview: Summary of tax implications and calculations

5. Corporate Approval: Copy of relevant corporate resolutions approving the phantom share program

6. Participation Notice: Form for accepting participation in the phantom share program

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓƵ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
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Relevant Industries

Technology

Financial Services

Manufacturing

Professional Services

Healthcare

Retail

Energy

Real Estate

Telecommunications

Software

Consulting

Biotechnology

Relevant Teams

Human Resources

Legal

Finance

Executive Management

Corporate Development

Compensation & Benefits

Accounting

Tax

Operations

Strategy

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Managing Director

Senior Executive

Department Head

Key Account Manager

Senior Manager

Technical Lead

Principal Engineer

Senior Consultant

Regional Director

Business Unit Leader

Vice President

Country Manager

Senior Specialist

Industries







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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