Equity-compensation documents
Record an award of shares or options to someone: what it is, how it is earned and what happens if they leave.
Grant employees shares or options as part of their pay.
- Business / Legal document
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Key features
The award and the plan
What is awarded, the number and class, the date, and any plan it is made under, which governs if it differs.
Price and earning over time
What the recipient pays, the exercise price for options, and a schedule for earning the award with a start date or a trigger.
If the recipient leaves
What happens to the earned and unearned parts, with a blank for particular circumstances and an exercise period after leaving.
Buy-back, transfer and a sale of the company
Whether the company may buy back shares and at what price, limits on transfer, and what happens if the company is sold or reorganised.
Rights, tax and confirmations
No voting or distribution rights until shares are issued, tax left to the recipient with a prompt to take advice, and the recipient's confirmations including that value may fall to nothing.
About this document
An equity award agreement records that a company awards a recipient shares or an option over shares as part of what they receive for their work. It sets the award and any plan it is made under, what the recipient pays, how and when it is earned, what happens if they leave, exercise of options, any buy-back, transfers, a sale of the company, tax, information and confirmations.
This blank form is completed by hand and signed by company and recipient. It leaves every number, schedule and price for the parties. Equity awards raise tax, securities and company-law questions that differ by state and by the kind of company and award, and the form says neither party is advising the other about tax. Take advice from a lawyer and a tax adviser before granting or accepting one.
Is this document right for you?
Useful when
- You are giving a key hire or adviser an ownership stake
- You are an employee offered shares or options
- You want vesting and leaver terms written down
Commonly used by
- Start-ups and private companies
- Key employees and advisers
- Founders awarding equity
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Alternatives
These are separate documents, for different jobs.
- Share issuance documentsIssue new shares and record who receives them.View document
- Founder agreementsAgree roles, equity and decisions between co-founders.View document
- Shareholder agreementsGovern how shareholders own, vote and sell their shares.View document
- Ownership and equity documentsRecord who owns what share of the company.View document
When to use this
- A start-up grants a new engineer options that are earned over time
- A company awards shares with a buy-back if the recipient leaves early
- A recipient wants to understand what happens in a sale
What happens next
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More in Shareholder & Ownership
- Founder agreementsAgree roles, equity and decisions between co-founders.View document
- Shareholder agreementsGovern how shareholders own, vote and sell their shares.View document
- Ownership and equity documentsRecord who owns what share of the company.View document
- Share issuance documentsIssue new shares and record who receives them.View document
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Questions
About the equity-compensation documents
No. It says the recipient is responsible for any tax and encourages them to take advice. Tax on equity is complex and varies, so get advice before you sign.
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