I need to draft a share agreement
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Description
Experience Level: Intermediate
I hope you are well. I wonder if you can help me.
I run an IT company based in Birmingham. The business has been trading for the past 10yrs - I recently acquired it from it's previous owner. I plan to sell the business in 3 years - in that time however I would like to focus on growing the business in order to achieve a high market valuation. The management team in place at the business have been instrumental to its success so I am keen to retain them up until I finally sell.
I would like to draw up an agreement between me and the management team that gives them shares in the business. The shares will not be given in one lump sum but earned over a period of time. I am hoping that this will encourage them to remain in the business until I sell.
I am not a legal expert so need help drafting such an agreement. I have read online that such provisions exist (phantom shares or incentive compensation plans). I like this type of agreement as it means that the employee has the right to a cash payment at a designated time according to the phantom share scheme but without any dilution of the share structure.
The agreement has to include:
Person A gets 15% share holding earned over 3 years (5% per year)
Person B gets 10% share holding earned over 3 years (4% Year 1 and then 3.5% in Year 2 and 3)
Person C & D gets 9% share holding earned over 3 years (3% per year)
Stipulations:
1. To qualify for the shares the manager must be continuously employed by the business during the 3 years.
2. If the manager decides to leave before the 3 years are up they forsake any shares earned
3. When the business is sold they get a percentage value of the sale value according to their shareholding so if the business was sold for £1m for example then:
Person A gets: £150,000
Person B gets: £100,000
Person C & D gets: £90,000
4. The business will be sold as a going concern. Managers will need to remain with the business for 6 months following the sale to assist with handover for the new buyer. Managers can choose to leave after this period or continue working with the new owner.
5. Shares will not be issued if the business fails to meet year on year growth target of 10% (this is currently 20%)
Can you help with this?
I run an IT company based in Birmingham. The business has been trading for the past 10yrs - I recently acquired it from it's previous owner. I plan to sell the business in 3 years - in that time however I would like to focus on growing the business in order to achieve a high market valuation. The management team in place at the business have been instrumental to its success so I am keen to retain them up until I finally sell.
I would like to draw up an agreement between me and the management team that gives them shares in the business. The shares will not be given in one lump sum but earned over a period of time. I am hoping that this will encourage them to remain in the business until I sell.
I am not a legal expert so need help drafting such an agreement. I have read online that such provisions exist (phantom shares or incentive compensation plans). I like this type of agreement as it means that the employee has the right to a cash payment at a designated time according to the phantom share scheme but without any dilution of the share structure.
The agreement has to include:
Person A gets 15% share holding earned over 3 years (5% per year)
Person B gets 10% share holding earned over 3 years (4% Year 1 and then 3.5% in Year 2 and 3)
Person C & D gets 9% share holding earned over 3 years (3% per year)
Stipulations:
1. To qualify for the shares the manager must be continuously employed by the business during the 3 years.
2. If the manager decides to leave before the 3 years are up they forsake any shares earned
3. When the business is sold they get a percentage value of the sale value according to their shareholding so if the business was sold for £1m for example then:
Person A gets: £150,000
Person B gets: £100,000
Person C & D gets: £90,000
4. The business will be sold as a going concern. Managers will need to remain with the business for 6 months following the sale to assist with handover for the new buyer. Managers can choose to leave after this period or continue working with the new owner.
5. Shares will not be issued if the business fails to meet year on year growth target of 10% (this is currently 20%)
Can you help with this?
Angela P.
100% (4)Projects Completed
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28 Oct 2019
United Kingdom
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Do you envisage any other benefits from these "shares" apart from receiving money in the event of sale? Voting rights, dividends, etc? I guess not.
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