Co Founder Vesting Agreement Template for Pakistan

A Co Founder Vesting Agreement is a legal contract that establishes how and when co-founders earn their equity shares in a Pakistani company over time. Rather than receiving all shares immediately, this agreement creates a structured timeline where shares "vest" gradually, ensuring founders remain committed to the business long-term. Under Pakistani law, this document must comply with the Companies Act 2017, Contract Act 1872, and Securities Act 2015 to be legally enforceable.

When do you need this document?

You need a Co Founder Vesting Agreement when establishing a startup or early-stage company with multiple founders in Pakistan. This document is crucial during company formation when you're allocating initial shares among co-founders, especially if founders are contributing different levels of time, money, or expertise. It's also essential when bringing on new co-founders to an existing business, ensuring all parties understand their equity timeline. Pakistani startups particularly benefit from this agreement as it prevents costly founder disputes that can derail business growth and protects the company's interests if a founder leaves early.

Key legal considerations

The agreement must include a clear vesting schedule, typically spanning 3-4 years with a 12-month cliff period before any shares vest. You need to define "Good Leaver" and "Bad Leaver" scenarios, as these determine what happens to unvested shares when a founder exits. The document should specify acceleration triggers, such as company sale or founder termination without cause, and include detailed share transfer restrictions. Pakistani law requires proper consideration for the agreement, clear definitions of all terms, and compliance with stamp duty requirements under the Stamp Act 1899. You must also address tax implications under the Income Tax Ordinance 2001, particularly regarding capital gains when shares vest.

Legal requirements in Pakistan

Under the Companies Act 2017, any share transfer or vesting arrangement must be properly documented and filed with the Securities and Exchange Commission of Pakistan (SECP). Your agreement must comply with the Securities Act 2015 regarding private company share transfers and include appropriate restrictions on share transfers to third parties. The document requires proper stamping under the Stamp Act 1899, and you must ensure the company's Articles of Association permit the vesting arrangement. Pakistani corporate law also requires board resolutions approving the vesting agreement and proper maintenance of share registers. Additionally, founders should consider the tax implications of share vesting under the Income Tax Ordinance 2001 and ensure compliance with any foreign exchange regulations if international founders are involved.