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Sweat Equity Contract

Sweat Equity Contract Template for Indonesia

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Key Requirements PROMPT example:

Sweat Equity Contract

"I need a Sweat Equity Contract for my Indonesian technology startup to bring on a senior software developer, offering 5% equity vesting over 3 years with a 6-month cliff, in exchange for developing our core platform starting March 2025."

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Document background
A Sweat Equity Contract is utilized when a company, typically an Indonesian PT (Perseroan Terbatas), wishes to compensate service providers with company ownership instead of traditional monetary payment. This arrangement is particularly common in startup environments, professional services, and technology sectors where cash conservation is crucial for business growth. The document must comply with Indonesian Company Law and related regulations, including specific requirements for share issuance, foreign ownership restrictions if applicable, and corporate governance standards. It typically includes detailed service specifications, equity vesting schedules, performance milestones, and provisions for protecting both parties' interests. This type of agreement is especially relevant for early-stage companies seeking to attract talent or professional services while preserving cash resources.
Suggested Sections

1. Parties: Identification of the Company and the Service Provider

2. Background: Context of the agreement, including company status and reason for sweat equity arrangement

3. Definitions: Key terms used throughout the agreement

4. Services: Detailed description of services to be provided by the Service Provider

5. Equity Compensation: Details of equity to be granted, including percentage, class of shares, and nominal value

6. Vesting Schedule: Timeline and conditions for equity vesting

7. Performance Milestones: Specific deliverables or targets that trigger equity vesting

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

9. Confidentiality: Protection of company information and trade secrets

10. Intellectual Property Rights: Ownership and transfer of IP created during service provision

11. Term and Termination: Duration of agreement and conditions for ending it

12. Dispute Resolution: Process for resolving disagreements

13. Governing Law: Specification of Indonesian law as governing law

14. General Provisions: Standard boilerplate clauses including notices, amendments, etc.

Optional Sections

1. Non-Competition: Restrictions on competing activities, optional based on service provider's role

2. Share Transfer Restrictions: Additional limitations on transfer of vested shares, if needed

3. Tag-Along Rights: Right to join in sale of shares by major shareholders, relevant for significant equity stakes

4. Drag-Along Rights: Obligation to join in sale of company, relevant for significant equity stakes

5. Board Representation: Rights to board seat or observer status, for substantial equity grants

6. Foreign Ownership Compliance: Required if service provider is non-Indonesian

7. Tax Provisions: Specific tax handling agreements, if needed based on structure

Suggested Schedules

1. Schedule 1 - Service Description: Detailed scope of services to be provided

2. Schedule 2 - Vesting Schedule: Detailed timeline and conditions for equity vesting

3. Schedule 3 - Performance Metrics: Specific KPIs and evaluation criteria

4. Schedule 4 - Share Details: Description of share class, rights, and restrictions

5. Schedule 5 - Company Information: Key company details and capitalization table

6. Appendix A - Required Shareholder Resolutions: Draft resolutions for implementing equity grant

7. Appendix B - Share Certificate Template: Format for share certificates to be issued

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 | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Articles of Association
Board of Directors
Business Day
Commencement Date
Company
Confidential Information
Deed of Share Transfer
Effective Date
Equity Interest
Fair Market Value
Fully Diluted Basis
Good Reason
Intellectual Property Rights
Material Adverse Change
Milestones
Nominal Value
Notice
Ordinary Shares
Parties
Performance Criteria
PT
Service Provider
Services
Share Certificate
Shareholders
Shareholders' Agreement
Shares
Termination Date
Term
Unvested Shares
Vested Shares
Vesting Date
Vesting Period
Vesting Schedule
Work Product
Clauses
Interpretation
Appointment
Services
Service Provider Obligations
Company Obligations
Equity Grant
Vesting
Performance Requirements
Share Issuance
Share Rights
Transfer Restrictions
Confidentiality
Intellectual Property
Non-Competition
Non-Solicitation
Representations and Warranties
Term and Duration
Termination
Effects of Termination
Force Majeure
Assignment
Notices
Dispute Resolution
Governing Law
Tax Matters
Regulatory Compliance
Shareholder Rights
Board Representation
Information Rights
Tag-Along Rights
Drag-Along Rights
Amendment
Entire Agreement
Severability
Waiver
Further Assurance
Costs
Counterparts
Relevant Industries

Technology

Software Development

Professional Services

Consulting

E-commerce

Digital Media

Financial Technology

Creative Industries

Business Services

Startup Ecosystem

Education Technology

Healthcare Technology

Relevant Teams

Legal

Human Resources

Finance

Corporate Secretarial

Executive Leadership

Board of Directors

Compliance

Operations

Relevant Roles

CEO

CTO

Technical Advisor

Business Development Consultant

Software Developer

Strategic Advisor

Product Manager

Marketing Strategist

Financial Advisor

UX/UI Designer

Operations Manager

Technology Consultant

Business Mentor

Systems Architect

Industries
Law No. 40 of 2007 on Limited Liability Companies (Company Law): Fundamental law governing corporate structures, share issuance, and equity distribution in Indonesian companies
Law No. 13 of 2003 on Labor: Regulates employment relationships, including provisions that may affect service-for-equity arrangements
Government Regulation No. 47 of 2012: Covers corporate social and environmental responsibility, which may affect terms of service contribution
Law No. 25 of 2007 on Investment: Regulates investment activities and ownership in Indonesian companies, including restrictions on foreign ownership
Income Tax Law No. 36 of 2008: Governs taxation of equity compensation and share transfers
BKPM Regulation No. 4 of 2021: Recent investment law implementation guidelines affecting company ownership and capital structure
OJK Regulation No. 17/POJK.04/2020: Financial Services Authority regulation on share issuance and capital changes in public companies
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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