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Equity Grant Agreement for India

Equity Grant Agreement Template for India

A comprehensive legal document governed by Indian law that formalizes the grant of equity shares from a company to an individual or entity. The agreement details the terms and conditions of the equity grant, including the number and class of shares, vesting schedule, rights and restrictions attached to the shares, and compliance requirements under Indian corporate and securities laws. It incorporates essential provisions for tax implications, transfer restrictions, and regulatory compliance under the Companies Act, 2013, SEBI regulations, and other applicable Indian legislation.

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What is a Equity Grant Agreement?

The Equity Grant Agreement serves as a crucial legal instrument in Indian corporate practice for companies looking to distribute ownership interests to employees, investors, or other stakeholders. This document is particularly essential in scenarios involving employee stock options, founder equity distributions, or strategic investment arrangements. The agreement must comply with Indian regulatory requirements, including the Companies Act, 2013, SEBI regulations, and applicable tax laws. It typically includes detailed provisions on vesting schedules, share rights, transfer restrictions, and tax implications. The document is commonly used by both established companies and startups, especially in contexts where equity-based compensation or investment is a key component of business strategy. The Equity Grant Agreement needs to be carefully drafted to ensure it meets both regulatory requirements and the specific needs of the parties involved, while providing clear mechanisms for dispute resolution and exit provisions.

What sections should be included in a Equity Grant Agreement?

1. Parties: Identification of the company issuing equity and the recipient(s)

2. Background: Context of the equity grant, relationship between parties, and purpose of the agreement

3. Definitions: Definitions of key terms used throughout the agreement

4. Grant of Equity: Details of the equity being granted, including number of shares, class of shares, and grant price if applicable

5. Vesting Schedule: Timeline and conditions for vesting of the equity grant

6. Rights Attached to Shares: Voting rights, dividend rights, and other privileges attached to the granted shares

7. Transfer Restrictions: Limitations on transfer of shares and right of first refusal provisions

8. Representations and Warranties: Statements of fact and assurances from both parties

9. Tax Obligations: Responsibilities for tax payments and compliance with tax laws

10. Confidentiality: Obligations to maintain confidentiality of company information

11. Governing Law and Jurisdiction: Applicable law and courts having jurisdiction

12. Notices: Process for sending formal communications between parties

13. Amendment and Termination: Procedures for modifying the agreement and circumstances for termination

What sections are optional to include in a Equity Grant Agreement?

1. Lock-in Period: Additional holding period requirements, used when specific lock-in restrictions apply

2. Tag-Along Rights: Rights of the grantee to participate in sale of shares by other shareholders, included for senior executives or key employees

3. Drag-Along Rights: Company's right to force grantee to sell shares, included when company anticipates future sale or IPO

4. Non-Competition and Non-Solicitation: Restrictions on competitive activities, typically included for senior management or key employees

5. Foreign Investment Compliance: Additional provisions for compliance with FEMA when recipient is a non-resident

6. Board Seat Rights: Rights to board representation, included for strategic investors or senior management

7. Put and Call Options: Rights to sell back or purchase additional shares, included for strategic grants

8. Information Rights: Rights to receive company financial and operational information, included for significant shareholders

What schedules should be included in a Equity Grant Agreement?

1. Schedule 1 - Share Details: Detailed description of shares including class, rights, and any special terms

2. Schedule 2 - Vesting Schedule: Detailed breakdown of vesting timeline and milestones

3. Schedule 3 - Deed of Adherence: Format for binding transferees to shareholders agreement

4. Schedule 4 - Fair Market Value Calculation: Methodology for calculating share value for tax purposes

5. Schedule 5 - Required Regulatory Approvals: List of necessary regulatory approvals and compliance requirements

6. Appendix A - Board Resolution: Copy of board resolution approving the equity grant

7. Appendix B - Shareholder Resolution: Copy of shareholder resolution if required for the grant

8. Appendix C - Acceptance Form: Format for formal acceptance of the grant by recipient

Authors

Alex Denne

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

Jurisdiction

India

Publisher

Genie AI

Cost

Free to use

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