The Founder Equity Agreement serves as a fundamental document in establishing new businesses within the UAE, providing a legally binding framework that governs the relationship between founding members of a company. This agreement is essential when two or more individuals come together to establish a business venture, whether in mainland UAE or in free zones. It details crucial elements such as equity distribution, vesting schedules, founder responsibilities, and governance structures, while ensuring compliance with UAE commercial regulations. The document becomes particularly important given the UAE's specific requirements regarding company formation, local ownership rules, and corporate governance standards. Used at the company formation stage or during early restructuring, this agreement helps prevent future disputes by clearly documenting all founders' rights and obligations.
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1. Parties: Identification of all founding members and the company, including full legal names, addresses, and nationality details as required by UAE law
2. Background: Context of the agreement, including company formation details, business purpose, and founders' intentions
3. Definitions: Key terms used throughout the agreement, including technical, financial, and legal terminology
4. Share Capital and Ownership Structure: Details of authorized and issued share capital, classes of shares, and initial ownership percentages
5. Founder Commitments and Responsibilities: Roles, duties, and time commitment expectations for each founder
6. Board Composition and Governance: Structure of the board, appointment rights, voting mechanisms, and decision-making processes
7. Transfer Restrictions: Limitations on share transfers, right of first refusal, and tag-along/drag-along rights
8. Vesting Provisions: Share vesting schedule, cliff periods, and acceleration events
9. Intellectual Property Rights: Assignment of IP rights, including pre-existing IP and newly developed IP
10. Confidentiality: Protection of company and founder confidential information
11. Non-Competition and Non-Solicitation: Restrictions on competitive activities and solicitation of employees/customers
12. Dispute Resolution: Procedures for resolving disputes, including jurisdiction and governing law provisions
13. Termination: Circumstances and procedures for termination of founder involvement
14. General Provisions: Standard legal provisions including notices, amendments, and severability
1. Pre-Emptive Rights: Rights of existing shareholders to maintain ownership percentage in future funding rounds - include for startups planning future investment rounds
2. Tag-Along and Drag-Along Rights: Rights related to sale of shares to third parties - important for companies anticipating future exits
3. Founder Loans: Terms of any loans made by founders to the company - include if founders are providing initial capital as loans
4. Special Share Rights: Special voting or economic rights attached to certain share classes - include if implementing multiple share classes
5. Death and Incapacity Provisions: Procedures for handling shares in case of founder death or incapacity - important for family businesses or high-risk ventures
6. Anti-Dilution Protection: Protections against ownership dilution - include for companies planning multiple investment rounds
7. UAE Local Ownership Provisions: Specific provisions regarding UAE local ownership requirements - mandatory for mainland UAE companies
1. Schedule 1: Share Capital and Ownership Table: Detailed breakdown of share capital, share classes, and ownership percentages
2. Schedule 2: Initial Business Plan: Company's initial business plan and strategic objectives
3. Schedule 3: Founder Details: Comprehensive information about each founder including contact details and qualifications
4. Schedule 4: Vesting Schedule: Detailed vesting terms and timeline for founder shares
5. Schedule 5: IP Assignment Details: List of intellectual property being assigned to the company
6. Schedule 6: Reserved Matters: List of decisions requiring special approval mechanisms
7. Appendix A: Form of Deed of Adherence: Template for new shareholders to become bound by the agreement
8. Appendix B: Share Transfer Notice: Template for notice of intention to transfer shares
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