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Equity Participation Agreement Template for England and Wales

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Key Requirements PROMPT example:

Equity Participation Agreement

"Need an Equity Participation Agreement for our UK-based tech startup to secure a Series A investment of £2M from a venture capital firm, with anti-dilution protection and board appointment rights for the investor, to be completed by March 2025."

Document background
An Equity Participation Agreement is commonly used when companies seek to raise capital by offering equity stakes to investors. This document, governed by English and Welsh law, serves as the primary instrument for documenting the terms of investment, protecting both the investor's and company's interests. It typically includes detailed provisions about share subscription, warranties, board representation, and exit mechanisms. The agreement is particularly crucial for private companies, start-ups, and scale-ups seeking growth capital, ensuring clarity and legal certainty in ownership structures and investor rights.
Suggested Sections

1. Parties: Identification and details of all parties to the agreement, including the company, existing shareholders, and new investors

2. Background: Context and purpose of the agreement, including company structure and investment rationale

3. Definitions: Key terms used throughout the agreement including defined corporate, financial and legal terms

4. Subscription Details: Details of shares being issued, subscription price, payment terms and mechanics of the investment

5. Completion Mechanics: Process and conditions for completing the investment, including conditions precedent and timing

6. Warranties and Representations: Standard warranties from all parties regarding capacity, authority, and accuracy of information

7. Transfer Restrictions: Limitations on share transfers and pre-emption rights for future share disposals

8. Termination: Circumstances under which the agreement may be terminated and consequences of termination

9. Confidentiality: Obligations regarding confidential information and announcements

10. Governing Law and Jurisdiction: Specification of English and Welsh law as governing law and jurisdiction for disputes

Optional Sections

1. Tag-Along Rights: Rights of minority shareholders to join in sale of majority stake, typically included to protect minority shareholders

2. Drag-Along Rights: Rights of majority shareholders to force minorities to join in sale, included to facilitate potential future exit

3. Anti-dilution Protection: Protection against value dilution in future funding rounds, typically included for venture capital investments

4. Board Appointment Rights: Rights to appoint directors to the board, included for significant shareholders

5. Information Rights: Rights to receive financial and operational information, included for significant investors

6. Reserved Matters: List of actions requiring investor consent, included when investors require veto rights

Suggested Schedules

1. Schedule 1: Share Capital Structure: Details of current and post-investment share capital structure, including all share classes

2. Schedule 2: Warranties: Detailed warranties given by the company and existing shareholders regarding business operations

3. Schedule 3: Completion Requirements: Detailed list of completion deliverables and conditions precedent

4. Schedule 4: Form of Board Resolutions: Template board resolutions approving the investment

5. Appendix A: Shareholders' Agreement: Form of shareholders' agreement to be entered into at completion

6. Appendix B: Articles of Association: New or amended articles of association to be adopted at completion

Authors

Alex Denne

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

Relevant legal definitions





































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Relevant Industries
Relevant Teams
Relevant Roles
Industries

Companies Act 2006: Primary legislation governing company operations including share capital, share classes, directors' duties, shareholder rights, company constitution, articles of association, and share transfer provisions

Financial Services and Markets Act 2000: Regulates financial services industry, covering financial promotion restrictions, regulated activities, and investment requirements

Financial Services Act 2012: Establishes the financial regulatory framework and provisions for investment protection

Corporate Governance Code: Sets out best practices for corporate governance, board composition, and shareholder engagement principles

Tax Legislation Package: Includes Income Tax Act 2007, Corporation Tax Act 2010, Capital Gains Tax regulations, and Stamp Duty provisions affecting equity arrangements

Employment-Related Securities Legislation: Governs the implementation and operation of employee share schemes and equity-based compensation

Competition Law Framework: Comprises Enterprise Act 2002 and Competition Act 1998, governing merger control and competitive market practices

Data Protection Legislation: Includes UK GDPR and Data Protection Act 2018, ensuring proper handling of personal data in corporate transactions

Contract Law: Common law principles, Misrepresentation Act 1967, and Unfair Contract Terms Act 1977 governing contract formation and enforcement

Anti-Money Laundering Regulations: Money Laundering Regulations 2017 and Proceeds of Crime Act 2002, ensuring compliance in financial transactions and ownership transfers

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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