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Profit Sharing Agreement for Philippines

Profit Sharing Agreement Template for Philippines

A comprehensive legal document governed by Philippine law that establishes and regulates the sharing of profits between two or more parties. This agreement outlines the methodology for calculating profits, distribution mechanisms, payment terms, and parties' rights and obligations. It incorporates relevant provisions from the Philippine Civil Code, Corporation Code, and tax regulations to ensure compliance with local legal requirements while providing a clear framework for profit distribution and dispute resolution.

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What is a Profit Sharing Agreement?

The Profit Sharing Agreement serves as a crucial legal instrument in the Philippine business environment, used when parties wish to formalize arrangements for sharing business profits or investment returns. This document is essential for various business relationships, including partnerships, joint ventures, employee profit-sharing schemes, and investment arrangements. It must comply with Philippine corporate law, tax regulations, and securities laws while providing clear mechanisms for profit calculation, distribution, and dispute resolution. The agreement is particularly relevant in today's business landscape where collaborative business models and alternative compensation structures are becoming increasingly common. It includes detailed provisions for financial reporting, audit rights, and protection of parties' interests, making it suitable for both simple and complex profit-sharing arrangements.

What sections should be included in a Profit Sharing Agreement?

1. Parties: Identification of all parties to the agreement, including their legal names, addresses, and registration details

2. Background: Context of the agreement, relationship between parties, and purpose of the profit-sharing arrangement

3. Definitions: Detailed definitions of key terms used throughout the agreement, including 'Profits', 'Accounting Period', 'Distribution Date', etc.

4. Profit Calculation: Methodology for calculating distributable profits, including allowed deductions, expenses, and accounting principles to be applied

5. Profit Distribution: Details of how profits will be shared, including percentages, timing, and method of payment

6. Accounting and Records: Requirements for maintaining financial records, conducting audits, and providing financial statements

7. Payment Terms: Specifics about payment methods, currency, bank details, and timing of profit distributions

8. Representations and Warranties: Standard representations by all parties regarding their authority, capacity, and compliance with laws

9. Confidentiality: Provisions protecting confidential information shared during the course of the agreement

10. Term and Termination: Duration of the agreement and circumstances under which it can be terminated

11. Governing Law and Dispute Resolution: Specification of Philippine law as governing law and method of dispute resolution

12. General Provisions: Standard boilerplate clauses including notices, amendments, assignment, and severability

What sections are optional to include in a Profit Sharing Agreement?

1. Non-Competition: Restrictions on parties engaging in competing businesses, used when parties have access to sensitive business information

2. Intellectual Property Rights: Provisions regarding IP ownership and licensing, needed when the profit-sharing involves IP-generating activities

3. Management Rights: Provisions about participation in management decisions, included when profit sharing is linked to operational control

4. Employee Participation: Specific provisions for employee profit-sharing schemes, used when employees are included in the arrangement

5. Tax Provisions: Detailed tax handling procedures, included when complex tax implications exist or for cross-border arrangements

6. Force Majeure: Provisions for handling extraordinary events, particularly relevant for long-term arrangements

7. Exit Mechanisms: Procedures for parties to exit the arrangement, included in long-term or complex profit-sharing structures

What schedules should be included in a Profit Sharing Agreement?

1. Schedule A - Profit Calculation Formula: Detailed mathematical formula and methodology for calculating distributable profits

2. Schedule B - Distribution Schedule: Timing and frequency of profit distributions throughout the year

3. Schedule C - Accounting Principles: Specific accounting standards and principles to be followed

4. Schedule D - Authorized Representatives: List of authorized representatives for each party who can act under the agreement

5. Appendix 1 - Initial Business Plan: If applicable, the initial business plan or projections

6. Appendix 2 - Reporting Templates: Standard templates for financial reporting and profit calculation statements

Authors

Alex Denne

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

Jurisdiction

Philippines

Publisher

Ƶ

Document Type

Agreement Contract

Cost

Free to use
Relevant legal definitions



































Clauses

































Relevant Industries

Technology

Manufacturing

Retail

Professional Services

Real Estate

Agriculture

Financial Services

Construction

Healthcare

Hospitality

Mining

Entertainment

Education

E-commerce

Transportation and Logistics

Relevant Teams

Legal

Finance

Executive Leadership

Human Resources

Operations

Business Development

Compliance

Tax

Accounting

Corporate Strategy

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Managing Director

Business Development Manager

Corporate Lawyer

Financial Controller

Investment Manager

Human Resources Director

Operations Manager

Partnership Manager

Compliance Officer

Tax Manager

Business Owner

Entrepreneur

Joint Venture Manager

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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