Use this free equity agreement template when dealing with new investors.
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What are equity agreements? How do they work? And what should you include in a simple equity agreement template? Read on to find out.
An equity agreement, often referred to as a shareholder agreement or a shared equity agreement, is a legal contract that defines the relationship between a company and its shareholders.
It specifies the rights, duties, and protections of shareholders, as well as the operational procedures of the company.
This document sets obligations and expectations for all parties, promoting a harmonious and productive relationship.
This simple equity agreement template is a strong starting point for those looking to create their own equity agreement, such as a startup equity agreement.
The main purpose of an equity agreement is to provide a clear framework for the company's operations and the involvement of shareholders.
This agreement is designed to minimize potential disputes and maintain a smooth relationship between all parties involved.
It also provides a roadmap for the company's growth and development, ensuring that all shareholders are aligned with the company's strategic direction.
Typically, the company's legal team or board of directors are responsible for managing equity agreements.
However, all shareholders should have a clear understanding of the agreement and its implications.
Once signed and executed, the parties then need to keep copies of the agreement and to revisit it regularly to remain compliant with the terms set out.
The management of equity agreements involves several stages and various stakeholders within the organization. Below offers a general overview of how equity agreements are usually managed:
The first step in managing equity agreements is drafting the document – this is usually done by the company's legal team or an external legal counsel.
Once the draft is complete, it is reviewed by key stakeholders within the company. This could include the board of directors, senior management and the finance team.
They will ensure that the agreement aligns with the company's strategic goals and complies with all legal and financial regulations.
After internal approval, the equity agreement is presented to potential shareholders. There may be a period of negotiation where terms are discussed and potentially revised.
Once all parties agree to the terms, the equity agreement is signed and becomes a legally binding document. This can be done traditionally with pen and paper, or digitally using eSigning technology.
The terms then need to be implemented after the agreement is signed. This involves issuing shares, setting up dividend payments, and establishing any necessary operational procedures.
The agreement should also be regularly monitored to make sure all parties are sticking to their responsibilities and to manage any potential disputes.
Over time, the equity agreement may need to be amended to reflect changes in the company's structure, strategy, or shareholder base.
This involves a similar process to the initial drafting and approval. If necessary, the agreement can also be terminated according to the conditions outlined in the termination clause.
All versions of the equity agreement, along with any amendments or related documents, should be securely stored and easily accessible for future reference. This is important for transparency, accountability, and in case of any legal disputes.
This process can be time-consuming and complex, especially for larger organizations with multiple shareholders. That's why many companies are now turning to contract management software and automated templates to streamline the management of equity agreements.
Fortunately, having an equity agreement template stored and ready to be customized eliminates the need for legal support every time a new shareholder comes on board.
It also means that most terms within the equity agreement are standardized, which minimizes the opportunity to make costly mistakes.
Having a template to hand means you have a strong starting point for some basic types of equity agreements, including shared equity agreements and home equity agreements.
The good news is that equity agreements can also be automated in Juro's all-in-one contract management platform.
Juro's AI-enabled flexible and collaborative solution can make handling equity agreements faster and more efficient. Juro streamlines this process by:
If you're looking for an easier way to create, discuss, sign, and share equity agreements (or any other routine contracts), it's worth considering Juro.
Juro makes the whole contract process smoother, letting businesses automate up to 75% of regular contract tasks, and get contracts agreed up to 10x faster.
If your business wants a smarter and easier way to handle your equity agreements, click the button below to learn more.
An equity agreement template is a ready-made contract a company can adapt each time it brings in a new shareholder. It records who owns which shares and sets out what each shareholder can and can't do, from voting on decisions to selling their stake.
Usually, yes. Small early stakes often cause disputes later, because without a written agreement there's normally nothing to say what happens to the shares if that person stops contributing or wants to sell. Clear terms also give future investors a reliable record of who owns what, which they will usually check before investing.
A share subscription agreement records one transaction: an investor buying new shares in the company at an agreed price. An equity agreement governs the relationship that follows, including how shareholders make decisions and when they can sell or transfer their shares. Investors often sign both at the same time.
It should say whether a departing shareholder has to sell their shares and, if so, how the price is set. Many companies give existing shareholders a right of first refusal, which means the shares can't go to an outsider until the others have had the chance to buy them. Founders often also agree that their shares vest over time, so someone who leaves early keeps only part of their stake.
It's a sound starting point, but you'll usually need to tailor it to your share classes and to the rights each investor has negotiated. Company law also varies by country and state, so the terms need to fit your company's articles or bylaws. For specific legal advice on your contract templates, consult an attorney.
Set the template up in Juro once and generate each new equity agreement from it, with your finance or legal team adding the investor's details and the number of shares. If your standard terms change, you edit that one template and every agreement created afterward uses the new version. Signed agreements are stored together, so you can search them for vesting dates and transfer restrictions without digging through email.
Yes. Operator, Juro's AI drafting feature, can build a new equity agreement template from your existing contracts, picking up your drafting style and the positions you normally take on points like vesting and transfer rights. Your legal team reviews and approves that first draft before anyone uses it, so it reflects your risk appetite from the start.
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