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Earned Equity Agreement Generator for the USA

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Key Requirements PROMPT example:

Earned Equity Agreement

"I need an Earned Equity Agreement for my UK-based fintech startup to grant our new CTO 5% equity vesting over 4 years, with a one-year cliff period starting from March 2025."

Document background
The Earned Equity Agreement is a crucial document for companies in England and Wales looking to align long-term interests of key personnel with company success. This agreement type is commonly used in startups and growing businesses to attract and retain talent by offering ownership stakes that vest over time or upon achieving specific milestones. The document includes detailed provisions for share vesting, conditions for earning equity, and various scenarios affecting equity rights. It ensures compliance with UK company law, tax regulations, and employment legislation while protecting both the company's and recipient's interests.
Suggested Sections

1. Parties: Identification of the company and the equity recipient

2. Background: Context of the agreement and relationship between parties

3. Definitions: Key terms used throughout the agreement

4. Grant of Equity: Details of equity being granted and vesting conditions

5. Vesting Schedule: Timeline and conditions for equity vesting

6. Rights and Restrictions: Shareholder rights and any restrictions on shares

7. Termination Provisions: Consequences of employment termination on equity

Optional Sections

1. Tag-Along Rights: Rights for minority shareholders to join in the sale of shares when a majority shareholder sells their stake

2. Drag-Along Rights: Rights allowing majority shareholders to force minority shareholders to join in the sale of shares

3. Good/Bad Leaver Provisions: Specific terms defining treatment of equity based on circumstances of employment termination

Suggested Schedules

1. Schedule 1 - Vesting Schedule: Detailed breakdown of vesting timeline and milestones

2. Schedule 2 - Share Rights: Detailed description of share class rights and restrictions

3. Schedule 3 - Valuation Methodology: Agreed method for valuing shares for various purposes under the agreement

4. Schedule 4 - Tax Elections: Required tax forms and elections to be made by the parties

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

Relevant legal definitions








































Clauses

































Industries

Companies Act 2006: Primary legislation governing company operations including share capital regulations, directors' duties, shareholder rights and obligations, company constitution requirements, and share transfer provisions

Employment Rights Act 1996: Legislation covering employment-related aspects including equity tied to employment status, rights and obligations of employees, and terms of service implications

Finance Act 2014: Legislation governing tax implications for share schemes and employee share schemes regulations

Financial Services and Markets Act 2000: Regulatory framework for financial activities and securities, relevant if the agreement involves regulated financial activities

Income Tax (Earnings and Pensions) Act 2003: Legislation covering tax treatment of shares and employment-related securities provisions

Enterprise Management Incentives (EMI) regulations: Specific regulations governing EMI schemes and HMRC requirements for share-based incentives

Data Protection Act 2018 and UK GDPR: Legislation governing personal data handling requirements and privacy considerations in business agreements

Common Law Principles: Foundational legal principles including contract law fundamentals, equity principles, and fiduciary duties

Articles of Association: Company's constitutional documents that must be considered for consistency with share rights and restrictions

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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