Employee Share Option Agreement for Malta

Employee Share Option Agreement Template for Malta

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Employee Share Option Agreement

"I need an Employee Share Option Agreement under Maltese law for our Series A startup, granting options to 5 senior developers with a 4-year vesting period and a one-year cliff, including special provisions for an anticipated IPO in 2025."

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What is a Employee Share Option Agreement?

The Employee Share Option Agreement is a crucial document for companies operating in Malta who wish to offer their employees the opportunity to acquire ownership in the business through share options. This type of agreement is commonly used as part of a compensation package to attract, retain, and motivate key employees by aligning their interests with those of the company's shareholders. The document must comply with Maltese corporate law, employment regulations, and tax legislation, particularly the Companies Act (Chapter 386) and the Income Tax Act (Chapter 123). It typically includes detailed provisions on option grants, vesting schedules, exercise procedures, and the treatment of options in various scenarios such as employment termination or company sale. The agreement is particularly relevant for startups, growing companies, and established businesses looking to implement employee incentive schemes in Malta.

What sections should be included in a Employee Share Option Agreement?

1. Parties: Identification of the Company and the Employee (Option holder)

2. Background: Context of the agreement, including reference to employment relationship and share option scheme

3. Definitions and Interpretation: Definitions of key terms including 'Option', 'Exercise Price', 'Shares', 'Vesting Period', etc.

4. Grant of Option: Details of the share option grant, including number of shares, exercise price, and grant date

5. Vesting of Option: Vesting schedule and conditions that must be met before options can be exercised

6. Exercise of Option: Process and conditions for exercising options, including timing and payment requirements

7. Restrictions on Transfer: Limitations on transferring or assigning the options

8. Taxation: Tax obligations and responsibilities of both parties

9. Employment Relationship: Clarification that the agreement does not affect employment terms

10. Data Protection: Provisions regarding handling of personal data in accordance with GDPR

11. Notices: Process for formal communications between parties

12. Governing Law and Jurisdiction: Specification of Maltese law as governing law and jurisdiction

What sections are optional to include in a Employee Share Option Agreement?

1. Change of Control: Provisions for what happens to options in case of company sale or merger - include for larger companies or those planning exit

2. Malus and Clawback: Provisions allowing company to reduce or reclaim options in case of misconduct - include for senior positions

3. Good Leaver/Bad Leaver: Detailed provisions for treatment of options based on circumstances of employment termination - include if not covered in main scheme rules

4. Share Capital Reorganisation: Provisions for adjusting options in case of share splits or consolidation - include for companies likely to undergo restructuring

5. Shareholders' Agreement: Reference to and interaction with shareholders' agreement - include if employees will become shareholders

6. Drag Along/Tag Along: Rights and obligations in case of company sale - include for startups or companies planning exit

What schedules should be included in a Employee Share Option Agreement?

1. Option Certificate: Formal certificate detailing the option grant

2. Exercise Notice: Template form for exercising options

3. Deed of Adherence: Form for adherence to shareholders' agreement upon exercise

4. Tax Summary: Summary of tax implications under Maltese law

5. Vesting Schedule: Detailed breakdown of vesting dates and conditions

6. Company's Share Option Plan Rules: Full rules of the share option scheme referenced in the agreement

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

alex.den.21@genieai.co

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