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Equity Compensation Agreement

Equity Compensation Agreement Template for New Zealand

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Key Requirements PROMPT example:

Equity Compensation Agreement

"I need an Equity Compensation Agreement for our New Zealand-based startup to grant 50,000 stock options to a new Chief Technology Officer, with a 4-year vesting period starting March 1, 2025, and including standard non-compete provisions."

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Document background
The Equity Compensation Agreement serves as a crucial document for New Zealand companies looking to attract, retain, and motivate key talent through equity-based incentives. This agreement type is particularly important in competitive industries where companies need to offer compelling compensation packages beyond base salary. The document comprehensively addresses the granting of equity interests (such as shares, options, or RSUs) while ensuring compliance with New Zealand's Financial Markets Conduct Act 2013, Companies Act 1993, and relevant tax legislation. It's designed to protect both the company's interests and the recipient's rights while providing clear terms for equity vesting, exercise, and ownership transfer. The agreement typically forms part of a company's broader equity incentive scheme and must align with New Zealand's specific regulatory requirements for financial products and employee share schemes.
Suggested Sections

1. Parties: Identifies the company issuing the equity compensation and the recipient employee/contractor

2. Background: Sets out the context of the agreement, including the company's equity compensation program and purpose

3. Definitions: Defines key terms used throughout the agreement, including specific equity-related terminology

4. Grant of Equity: Details the type and amount of equity being granted (e.g., shares, options, RSUs)

5. Vesting Terms: Specifies the vesting schedule, conditions, and requirements for the equity to vest

6. Exercise Terms: For options, details the exercise price, process, and periods for exercising

7. Regulatory Compliance: Addresses compliance with NZ Financial Markets Conduct Act and other relevant legislation

8. Tax Obligations: Outlines tax implications and responsibilities of both parties under NZ tax law

9. Termination Provisions: Describes what happens to the equity in various termination scenarios

10. Confidentiality: Protects company confidential information accessed through shareholding

11. General Provisions: Standard contract terms including governing law, notices, and amendment processes

Optional Sections

1. Shareholder Rights: Details voting rights and other shareholder privileges, used when immediate shares are granted

2. Lock-up Period: Includes transfer restrictions, used when immediate liquidity needs to be restricted

3. Clawback Provisions: Allows company to recoup equity in case of misconduct, used for senior executives

4. Non-Competition: Restricts competitive activities, included for senior employees or key personnel

5. Tag-Along Rights: Gives minority shareholders right to join in sale of majority stake, used for significant equity grants

6. Drag-Along Rights: Requires minority shareholders to join in company sale, used for significant equity grants

7. International Compliance: Added when recipient is subject to foreign laws or agreement crosses jurisdictions

Suggested Schedules

1. Schedule 1: Grant Details: Specific details of equity grant including number of shares/options, price, dates

2. Schedule 2: Vesting Schedule: Detailed timetable and conditions for vesting of equity

3. Schedule 3: Acceptance Form: Form for recipient to formally accept the equity grant and terms

4. Schedule 4: Exercise Notice: Template form for exercising options when applicable

5. Schedule 5: Shareholders Agreement: Key terms from the company's shareholders agreement that apply to grant

6. Appendix A: Tax Summary: Summary of relevant tax implications and filing requirements

7. Appendix B: Regulatory Disclosures: Required disclosures under NZ Financial Markets Conduct Act

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
Applicable Law
Board
Business Day
Cause
Change in Control
Company
Confidential Information
Disability
Effective Date
Eligible Employee
Employment Agreement
Equity Interest
Exercise Date
Exercise Notice
Exercise Period
Exercise Price
Fair Market Value
Financial Markets Conduct Act
Financial Year
Good Leaver
Grant Date
Holding Period
Issue Price
Market Price
Notice
Option
Parent Company
Performance Conditions
Plan
Restricted Stock Unit (RSU)
Securities
Share
Share Capital
Shareholder
Shareholders Agreement
Share Option
Share Plan
Subsidiary
Tax
Termination Date
Transfer
Trust Deed
Trustee
Unvested Equity
Vest
Vesting Conditions
Vesting Date
Vesting Period
Vesting Schedule
Relevant Industries

Technology

Financial Services

Professional Services

Biotechnology

Manufacturing

Retail

Healthcare

Media and Entertainment

Software Development

Consulting

E-commerce

Research and Development

Clean Technology

Telecommunications

Relevant Teams

Human Resources

Legal

Finance

Executive Leadership

Engineering

Sales

Product Development

Research

Business Development

Operations

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Technology Officer

Senior Software Engineer

Product Manager

Sales Director

Senior Account Manager

Research Scientist

Department Head

Vice President

Managing Director

Technical Lead

Principal Engineer

Senior Consultant

Business Development Manager

Key Account Executive

Industries
Financial Markets Conduct Act 2013: Regulates how financial products are created, promoted and sold, and the ongoing responsibilities of those who offer, deal and trade them. This is crucial for equity-based compensation as it involves issuing securities.
Companies Act 1993: Governs corporate entities in New Zealand, including provisions about share issuance, share capital maintenance, and shareholder rights which are fundamental to equity compensation arrangements.
Income Tax Act 2007: Contains provisions regarding the taxation of employee share schemes and equity-based compensation, including specific rules about when and how such benefits are taxed.
Employment Relations Act 2000: Relevant when equity compensation is part of an employment relationship, ensuring the agreement aligns with basic employment rights and obligations.
Financial Markets Authority Act 2011: Establishes the Financial Markets Authority, which oversees financial products including employee share schemes and equity compensation arrangements.
Contract and Commercial Law Act 2017: Provides the general framework for contract formation and enforcement, which underlies any equity compensation agreement.
Fair Trading Act 1986: Ensures fair trading practices and prohibits misleading conduct in trade, relevant for representations made about equity compensation.
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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