How does one legally address vesting of shares for partners
Three partners are looking to incorporate a private limited company. We are going with an authorized capital of 10,000 shares of Rs 10 each. Out of this we want 4000 shares to be vested immediately split between all 3 partners. We want the rest of the 6000 shares to vest over the next 4 years equally between all 3 partners. Currently the draft of the Memorondum of Association has 10,000 shares as authorized capital and total number of suscribed shares as 4000 split equally between the partners. Where do we put the verbiage around the rest of the 6000 shares and the plan to have it vest over the next 4 years for all 3 partners. Should this go in the Memorundum of Association or the Article of Association? I want to ensure this can not be changed later. The lawyer tells us we can only address this piece (rest of the 6000 shares) after incorporation. Is this true?I would rather it be handled now as a part of the incorporation documents. Please advice on the best way to handle this so it is legally binding and can not be altered later.
Asked 1 year ago in Business Law from Mumbai, Maharashtra
Vesting is a contract clause which schedules a gradual acquisition of stock by a founder, usually to secure his dedication to the company for a certain period.
2) vesting of larger quantity of shares can occur at later period of time
3)founders agreement can be entered into between the partners outlining mutual understanding and setting out expectations of each party streamlining investment and distribution of money and highlighting roles, responsibilities and obligations of each party
Hi Ajay, I am sorry but this does not answer my question. I want to know if the vesting details need to be outlined in the MOA or Article of Association or Founders agreement? Is this part of the documents that are filed during incorporation or later? Also, wanted to ensure that the mechanism used ensures this can not be legally changed later by one of the partners..How does one ensure this? Thanks, Roopesh
Asked 1 year ago
vesting needs to be outlined in founders agreement
2) the founder agreement needs to reduced in writing and be duly stamped to avoid legal complications in future
3) you can incorporate an arbitration clause in the founder agreement for resolution of disputes