Equity Compensation Agreement Template
Hand-drafted equity compensation agreement template for 2026 — covering ISOs, NSOs, RSUs, restricted stock and UK EMI options, with 4-year vesting, 1-year cliff, single and double-trigger acceleration, 83(b) elections and Section 409A compliance. Suitable for US and UK private-company grants. Download today as PDF, Word or Google Docs.
Download Template See what’s inside →Quick answer. An equity compensation agreement is a legally binding contract that grants an employee, advisor or contractor the right to receive shares (or share units) in a company on defined terms - typically a 4-year vesting schedule with a 1-year cliff. The agreement specifies the equity type (ISO, NSO, RSU, RSA, or UK EMI option), the number of shares, the exercise price for options (set to fair market value at grant), the vesting commencement date, post-termination exercise window, acceleration triggers, and tax treatment. The template below works for both US (Section 409A compliant) and UK (EMI scheme compatible) grants. Download as PDF, Word or Google Docs.
What is Equity Compensation?
An equity compensation agreement is a legally binding contract that grants an employee, advisor, contractor or director the right to receive shares (or units representing shares) in a company on defined terms. It sets out how much equity is granted, what type it is (option, RSU, restricted stock), when it vests, what happens on termination, what tax treatment applies, and how the equity can later be exercised, sold or transferred.
Equity is the second-most-important hiring lever after cash for early-stage companies. It aligns the recipient's financial outcome with the long-term success of the business, lets the company hire above its cash budget, and (for tax-advantaged grants like ISOs in the US and EMI options in the UK) gives the recipient meaningful upside if the company exits successfully. Get it wrong and you create cap-table chaos, tax surprises and disputes; get it right and you align everyone for the long haul. The framework below applies in both the US (under IRS Section 409A) and the UK (under HMRC's EMI scheme rules).
Key Components of an Equity Compensation Agreement
- Parties — the granting company and the recipient
- Equity type — ISO, NSO, RSU, RSA or EMI option
- Number of shares or units — absolute number, not percentage
- Exercise price — for options only, set at fair market value at grant
- Vesting schedule — commencement date, total period, cliff
- Exercise window — period to exercise after termination
- Acceleration — single-trigger or double-trigger on change of control
- Tax provisions — 83(b) right, Section 409A compliance, EMI notification
- Transfer restrictions — ROFR, drag-along, lock-up
- Signatures and effective date
Equity Compensation vs Cash: When to Use Each
| Factor | Cash Compensation | Equity Compensation |
|---|---|---|
| Liquidity | Immediate (paid each month) | Illiquid until exit (sale, IPO) or secondary market |
| Risk | Low - paid regardless of company performance | High - worth zero if the company fails |
| Upside | Capped at the agreed salary | Uncapped - tied to company exit value |
| Tax Treatment (US) | Ordinary income tax + payroll tax | Mix of ordinary income and capital gains, depending on type |
| Tax Treatment (UK) | Income tax + National Insurance via PAYE | Tax-advantaged under EMI; otherwise income tax + NI |
| Cash Cost to Company | Direct payroll cost | Dilutive cost (cap table), no immediate cash outflow |
| Best For | Day-to-day cost of living, immediate hires | Long-term alignment, retention, upside-sharing |
The right mix depends on company stage. Pre-seed and seed-stage companies typically lean equity-heavy because cash is scarce and the upside is the only way to compete with established employers. Series A and B companies offer balanced packages - market-rate cash with meaningful equity. Later-stage and pre-IPO companies tend to be cash-heavier with smaller, often RSU-based, equity grants. Match the package to the stage.
What Equity Compensation Adds Over Cash
- Long-term retention via vesting schedules (4-year norm)
- Alignment of recipient's outcome with company exit value
- Tax-advantaged treatment for qualifying grants (ISO in US, EMI in UK)
- Ability to hire above the cash budget without burning runway
- Signal to recipients that they are owners, not just employees
- Optionality - recipients choose whether to exercise options based on outcome
Which Type of Equity Grant Do You Use?
Choosing the right equity instrument comes down to three questions: is the recipient an employee (or an advisor or contractor), where are they tax-resident, and how early-stage is the company? The decision tree below walks through it.
The most common mistake here is granting ISOs to people who don't qualify (advisors, board members, contractors) or letting the cumulative ISO grants in any single year exceed the IRS's USD 100,000 first-vesting limit, which silently reclassifies the excess as NSO and changes the tax outcome. UK EMI scheme rules and US IRS Section 422 (ISO) and 409A guidance both have strict eligibility tests - check them before issuing the grant agreement.
Legal & Tax Framework: UK and US
United Kingdom
UK equity grants are governed primarily by HMRC tax rules and the Companies Act 2006. The flagship tax-advantaged scheme is EMI (Enterprise Management Incentive) options - granted to employees of qualifying companies (under 250 staff, gross assets under GBP 30 million, qualifying trade), with no income tax or National Insurance on exercise (provided the exercise price is at or above market value at grant), and Business Asset Disposal Relief at the time of disposal. EMI grants must be notified to HMRC within 92 days of grant via the Employment Related Securities (ERS) annual return. Other UK schemes include CSOP (Company Share Option Plan), SAYE (Save As You Earn) and SIP (Share Incentive Plan), each with their own qualification rules and tax outcomes.
Non-tax-advantaged grants (often called "unapproved options" or growth shares) are taxed as employment income on exercise, with PAYE and NI applied through payroll. They are simpler to set up but materially less tax-efficient than EMI for both the company and the recipient. Section 431 elections (UK equivalent of the 83(b) election) can be filed with HMRC within 14 days of grant for restricted securities to fix the value at acquisition rather than vesting.
United States
US equity grants are governed primarily by IRC Section 409A (deferred compensation), Section 422 (ISOs), Rule 701 (private-company exemption from securities registration), and state corporate law. The single most important compliance point is Section 409A: stock options must be granted with an exercise price at or above the fair market value (FMV) of the underlying shares on the grant date, otherwise the entire grant is taxed as deferred compensation with a 20 percent penalty. Private companies establish FMV through an annual 409A valuation from an independent appraiser; this valuation typically lasts 12 months or until a material event (financing round, M&A activity).
Securities laws apply too. Most private-company grants to employees rely on SEC Rule 701, which exempts compensatory equity from full registration provided the grant satisfies certain quantitative and disclosure thresholds. Cross the Rule 701 thresholds (typically annual grants exceeding USD 10 million) and additional disclosure (financial statements, risk factors) is required. Larger ISO grants must respect the USD 100,000 first-vesting limit under Section 422(d) - any excess is automatically reclassified as NSO.
Key Tax-Compliance Anchors
- US: Section 409A annual valuation - keep it current
- US: Section 422(d) USD 100,000 first-vesting ISO limit per recipient per year
- US: 83(b) election filed within 30 days of grant (restricted stock or early-exercised options)
- US: Rule 701 disclosure thresholds for larger annual grant volumes
- UK: EMI HMRC notification within 92 days of grant
- UK: Annual ERS return for all employment-related securities events
- UK: Section 431 election within 14 days of grant for restricted securities
- Both: Cap-table software (Carta, Capdesk, Pulley) to maintain audit trail
Types of Equity Compensation
| Equity Type | Eligibility | Tax Treatment | Best For |
|---|---|---|---|
| ISO (US) | US W-2 employees only | Capital gains if held 1yr from exercise + 2yr from grant; possible AMT on exercise | US employees at early-stage companies |
| NSO (US) | Anyone (employees, advisors, contractors, directors) | Ordinary income on spread at exercise; capital gains on subsequent sale | US advisors, contractors, foreign employees |
| Restricted Stock (RSA) | Anyone | Taxed at vesting unless 83(b) election filed within 30 days | Founders, very early hires when FMV is low |
| RSU | Anyone | Ordinary income at vesting on full FMV (no exercise step) | Later-stage and public companies |
| EMI Option (UK) | UK employees of qualifying companies | No income tax/NI on exercise (at FMV); 14% Business Asset Disposal Relief on disposal | UK employees at qualifying companies |
| Unapproved Option (UK) | Anyone (UK) | Income tax + NI on exercise via PAYE | UK advisors, non-qualifying companies |
| CSOP (UK) | UK full-time directors and employees | No income tax on exercise (within GBP 60k limit) if held 3+ years | UK companies that don't qualify for EMI |
| Growth Shares (UK) | Anyone (UK) | Capital gains only on growth above hurdle; income tax on initial value | UK companies with high current valuation |
Choosing Between Types
- Stock options vs RSUs: Options give choice (exercise or walk away) and capital-gains-eligible upside; RSUs are simpler but taxed in full at vesting, which is painful in private companies with no liquidity to sell shares
- ISO vs NSO: ISOs are tax-advantaged but employee-only and subject to AMT; NSOs are flexible and predictable, taxed as ordinary income on the spread
- EMI vs unapproved (UK): EMI is dramatically more tax-efficient if both company and employee qualify; check qualifying trade rules carefully
- 83(b) on early-exercised options or restricted stock: Worth filing when FMV is low and you believe the company will appreciate - converts future ordinary income into long-term capital gains
What's Inside the Equity Compensation Template
The template is structured the way an equity counsel would draft it — eight sections covering the parties, grant terms, vesting, exercise, acceleration, tax, transfer restrictions and signatures. Easy to adapt for any equity type or grant size.
1. Parties & Grant Date
- Granting company and recipient
- Grant date (board approval)
- Reference to parent equity plan
- Recipient tax residency
2. Equity Type & Quantity
- ISO, NSO, RSU, RSA or EMI
- Number of shares or units
- Share class (common, preferred)
- Exercise price (for options)
3. Vesting Schedule
- Commencement date
- Total period (4 years standard)
- Cliff (1 year standard)
- Monthly thereafter (1/48 per month)
4. Exercise Provisions
- Exercise period (10 years for ISOs)
- Post-termination window (90 days+)
- Methods (cash, cashless, net)
- Early exercise option
5. Acceleration Triggers
- Single-trigger (rare, founders)
- Double-trigger (executives)
- Good-reason definition
- Acceleration percentage
6. Tax Provisions
- Section 409A compliance (US)
- 83(b) election right (US)
- EMI HMRC notification (UK)
- Withholding obligations
7. Transfer Restrictions
- Right of First Refusal (ROFR)
- Drag-along on acquisition
- IPO lock-up (180 days)
- Permitted transferees
8. Signatures & Exhibits
- Both parties sign and date
- Notice of grant (Exhibit A)
- Exercise notice form (Exhibit B)
- 83(b) election form (Exhibit C)
All sections are editable. The vesting schedule and acceleration provisions are the two clauses most often customised — everything else stays consistent across grants under the same equity plan. Run every grant through your cap-table software (Carta, Capdesk, Pulley) within 30 days to maintain a clean audit trail.
How to Fill Out an Equity Compensation Agreement: Step-by-Step
Establish: Granting company name and registered address, recipient legal name and tax residency, and the precise grant date approved by the board.
- Use the company's full registered name (must match cap-table records)
- Use the recipient's legal name (matches passport, SSN/NI number)
- Set the grant date to match board approval date in the minutes
- Reference the parent equity plan (e.g. "2026 Equity Incentive Plan")
- State the recipient's tax residency — this drives the entire tax framework
Specify: The equity type (ISO, NSO, RSU, RSA, EMI), number of shares or units, share class, and exercise price for options.
- State the exact number of shares or units — never grant in percentages
- For options, set exercise price at current 409A FMV (US) or HMRC-agreed market value (UK EMI)
- Specify share class (commonly common stock or ordinary shares)
- For US ISOs, ensure the recipient is a W-2 employee (not contractor)
- For UK EMI, confirm both company and recipient meet qualifying conditions
- Watch the USD 100,000 ISO first-vesting limit per recipient per year
Define: Vesting commencement date, total vesting period, cliff period, and vesting cadence after the cliff.
- Default: 4 years total, 1-year cliff (25 percent at month 12), monthly thereafter (1/48 per month)
- Set vesting commencement date — usually start date, not grant date
- State what happens to unvested equity on termination (forfeited unless otherwise stated)
- Consider milestone-based vesting for performance-driven roles
- For executives, consider partial acceleration on involuntary termination
Specify: Total exercise period, post-termination exercise window, exercise mechanics, and whether early exercise is permitted.
- For ISOs, exercise period is capped at 10 years from grant (IRS rule)
- Default post-termination window: 90 days for ISOs (legal default), longer for NSOs
- Many companies offer extended post-termination exercise (1-10 years) for NSOs
- Specify exercise methods: cash, cashless, net exercise
- Consider whether to permit early exercise (allows 83(b) on options)
Decide: Whether to include single-trigger or double-trigger acceleration on a change of control, and the percentage of acceleration.
- Default for executives: double-trigger acceleration on involuntary termination after change of control
- Single-trigger is rare and usually reserved for founders or board-level grants
- Common acceleration: 100 percent for executives, 50 percent or "12 months extra" for senior staff
- Define "good reason" precisely (material role change, location change, salary cut)
- Specify the protection window after change of control (commonly 12-18 months)
Include: Section 409A compliance reference (US), 83(b) election right (US), EMI HMRC notification (UK), and recipient's tax-advice acknowledgement.
- State that the grant is intended to be 409A-compliant (US) or EMI-qualifying (UK)
- For restricted stock or early-exercised options (US), explicitly state the 83(b) election right with the 30-day deadline
- For UK EMI, confirm the company will notify HMRC within 92 days of grant
- State withholding obligations clearly (PAYE/NI for UK, federal/state withholding for US)
- Include a tax-advice disclaimer — recipient is responsible for their own tax position
Execute: Add ROFR, drag-along and lock-up clauses; both parties sign and date; file with HMRC/IRS as required and update cap table.
- Include Right of First Refusal (ROFR) on shares received from exercise
- Include drag-along provisions for change-of-control transactions
- Add IPO lock-up clause (180 days post-IPO is standard)
- Use DocuSign, Adobe Sign or HelloSign for electronic execution
- For US ISOs, send recipient the ISO disqualifying disposition rules
- For UK EMI, file HMRC notification within 92 days; include in next ERS annual return
- Update cap-table software (Carta, Capdesk, Pulley) within 30 days of grant
Critical Success Factors
- Use a current 409A valuation (US) or HMRC-agreed valuation (UK EMI) as the exercise price floor
- Confirm ISO eligibility before granting (W-2 employee, USD 100k limit, 10-year period)
- File 83(b) elections within 30 days of grant for restricted stock or early-exercised options
- Notify HMRC of EMI grants within 92 days; track via the annual ERS return
- Update the cap-table software the same day the grant is approved — never let paper and database diverge
Best Practices for Equity Compensation Agreements
Drafting and Customisation
- Master plan, individual grant agreements: Maintain one parent equity plan (the 2026 Equity Incentive Plan) with grant agreements that reference it — never recite full plan terms in each grant
- Standardised vesting: Default to 4-year vesting with 1-year cliff for everyone; deviate only for founders, contractors and advisors
- Plain English: Recipients without legal training need to understand what they're getting; avoid archaic language
- Version control: Date every version of the template; never amend a signed grant agreement without a written amendment and board approval
- Clause library: Maintain a library of approved acceleration variants (single-trigger founder, double-trigger exec, 12-month catch-up) for quick selection
Issuance and Onboarding
- Approve in board minutes first: Every grant needs prior board approval; the grant date in the agreement should match the board approval date
- Send with onboarding pack: Bundle the grant agreement with the parent plan, the most recent 409A or HMRC valuation summary, and a tax overview
- Allow time to read: Don't ask recipients to sign on the spot — equity is significant and they may want independent tax advice
- Recommend independent tax advice: For executive grants and any grant exceeding USD 100k or GBP 100k value, suggest the recipient consult a tax advisor
- 83(b) reminder: If filing is relevant, send the recipient the 83(b) form template and the 30-day deadline reminder on grant date
Storage and Compliance
- Cap-table software: Mirror every grant in Carta, Capdesk, Pulley or equivalent within 30 days of board approval
- Annual valuation refresh: Refresh 409A (US) annually or after material events; refresh HMRC EMI valuation in similar cycle
- Annual reporting: File US Forms 3921 (ISO) and 3922 (ESPP) by 31 January; file UK ERS annual return by 6 July
- Retention: Keep grant agreements for the life of the equity plus the longest applicable limitation period (6 years UK, varies US)
- Audit trail: Maintain a contemporaneous file of board approvals, grant agreements, exercise notices, 83(b) elections and HMRC notifications
Modern Practice in 2026
- Cap-table platforms (Carta, Capdesk, Pulley) for grant administration and audit trail
- Electronic signature platforms (DocuSign, Adobe Sign) for execution
- Standardised grant templates with pre-approved clause libraries by recipient type
- Automated 409A valuations from independent appraisers (Carta, Eqvista, Aranca)
- Cross-border tax-treaty modelling for grants to recipients in multiple jurisdictions
- Post-termination exercise window extensions (1-10 years) becoming standard for NSOs
Common Mistakes to Avoid
Top 10 Equity Compensation Pitfalls
- Granting without a current 409A valuation (US): Without a current valuation, you cannot defensibly set the exercise price at FMV — the entire grant becomes 409A-non-compliant
- Granting ISOs to non-employees: ISOs require W-2 employee status; granting to advisors or contractors silently converts the grant to NSO with very different tax outcomes
- Exceeding the USD 100k ISO first-vesting limit: Excess automatically reclassifies as NSO; keep a running total per recipient per year
- Missing the 83(b) deadline: The 30-day deadline from grant is unforgivable; if missed, the recipient cannot reset the tax clock
- Forgetting EMI HMRC notification: 92-day deadline for EMI grants; missing it loses the tax-advantaged status entirely
- Granting in percentages, not shares: Percentages don't survive financing rounds — always grant a fixed number of shares
- Skipping board approval: Every grant requires board approval before the grant date; missing this creates corporate-law exposure
- Inconsistent vesting commencement dates: Some agreements use start date, others use grant date — mismatches create payroll and tax errors
- Forgetting to update the cap table: Paper grants without database mirrors lead to disputed share counts at exit — mirror every grant in Carta/Capdesk/Pulley within 30 days
- Repricing without proper process: Repricing options is heavily regulated; always go through formal board approval, accounting review and Section 409A re-analysis
UK vs US Tax Context
Equity compensation tax treatment is one of the most jurisdiction-specific areas of practice — the same grant in London and San Francisco produces fundamentally different outcomes for both company and recipient. Here's the side-by-side that matters when drafting.
United Kingdom
UK equity grants are governed primarily by HMRC tax rules, with the flagship tax-advantaged scheme being EMI options. EMI grants to qualifying employees of qualifying companies have no income tax or National Insurance on exercise (provided the exercise price is at or above market value at grant), and qualify for Business Asset Disposal Relief at 14 percent capital gains tax on disposal (subject to lifetime limits). Other UK schemes include CSOP, SAYE and SIP, each with their own rules.
UK companies must notify HMRC of EMI grants within 92 days and file an annual ERS return for all employment-related securities events. Section 431 elections (the UK equivalent of US 83(b)) can be filed within 14 days of grant for restricted securities. UK guidance from HMRC's Employment Related Securities team is the authoritative source for ongoing compliance.
United States
US equity is dominated by IRC Section 409A (deferred compensation), Section 422 (ISOs), Rule 701 (private-company exemption from securities registration), and state corporate law. The single most important compliance point is Section 409A: stock options must be granted with an exercise price at or above the fair market value (FMV) of the underlying shares on the grant date, otherwise the entire grant is taxed as deferred compensation with a 20 percent penalty.
ISOs are tax-advantaged but limited: they can only be granted to W-2 employees, the spread at exercise can trigger AMT, and the USD 100,000 first-vesting limit caps each recipient. NSOs are flexible but lose the tax advantages. RSUs are simpler but taxed at vesting on full FMV, which is painful in private companies with no liquidity. Annual federal filings: Form 3921 (ISO exercises) and Form 3922 (ESPP), both due by 31 January for the prior year.
Both jurisdictions
The mechanics are similar even when the substantive law is different: identify the parties, specify the equity type and quantity, set the vesting schedule, address acceleration, comply with tax rules, sign. The template uses jurisdiction-neutral drafting where possible and provides alternative clauses where the law differs — for example, "ISO" vs "EMI Option", or "83(b) election" vs "section 431 election", or "409A FMV" vs "HMRC-agreed market value".
What founders and CFOs say
Feedback from founders, CFOs and equity administrators who have used the equity compensation template on real grants.
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Used this for our first ten engineering grants under our 2026 plan. The vesting schedule and 83(b) language are properly drafted — our outside counsel made one tweak and signed it off. Saved us about a thousand pounds in legal fees.
Cleaner than the Carta-supplied template we'd been using. The EMI / ISO split clauses make this usable for our trans-Atlantic team without having to maintain two completely separate grant documents.
Adapted for an advisor NSO grant — the post-termination exercise window clauses dropped in cleanly. Wish there was an explicit secondary-sale template, but for advisor and contractor grants this is solid.
Used this for an executive hire with a meaningful ISO package. The double-trigger acceleration provisions and the for-cause definition gave us comfort that we have a defensible position if the next round brings change of control.
As an equity administrator, the most useful thing about this template is the clause-level commentary. Our finance team can populate the bulk of the grant agreement themselves, and I only need to review the acceleration triggers and exec packages.
Solid foundational template. The exhibit structure for the notice of grant, exercise notice and 83(b) form keeps the main agreement clean. The 409A FMV reference language was a nice touch — saved me from drafting it from scratch.
Equity Compensation — Frequently Asked Questions
It is the market-standard equity vesting schedule for early-stage companies. The recipient earns their equity over 4 years, but they vest nothing for the first 12 months — this is the cliff. On the 1-year anniversary of the vesting commencement date, 25 percent vests in a single tranche, and the remaining 75 percent vests in 36 equal monthly increments (1/48th of the total grant per month). If the recipient leaves before the cliff is reached, they walk away with zero. The cliff protects the company from misaligned hires; the 4-year period is long enough to align with typical funding cycles and exit timelines.
Both are US stock options, but the tax treatment is different. Incentive Stock Options (ISOs) can only be granted to employees and qualify for preferential tax treatment if held long enough (1 year from exercise and 2 years from grant) — the gain is taxed as long-term capital gains, not ordinary income. Exercising ISOs can trigger Alternative Minimum Tax (AMT). Non-Qualified Stock Options (NSOs) can be granted to anyone (employees, advisors, contractors) and do not have AMT issues, but the spread between exercise price and fair market value at exercise is taxed as ordinary income, with W-2 withholding. Most early-stage US grants are ISOs to employees and NSOs to advisors and contractors.
An 83(b) election is a US tax filing that lets a recipient of restricted stock or early-exercised options pay ordinary income tax on the value of the shares at grant, rather than at vesting. If the shares appreciate, all future gain is taxed as long-term capital gains rather than ordinary income, which can save a significant amount on a successful exit. The election must be filed with the IRS within 30 days of the grant (or early-exercise) date — this deadline is strict and unforgivable. File the form by certified mail with return receipt, keep the receipt, and give a copy to the company and your tax preparer. UK equivalents (section 431 election for restricted securities) work similarly and have their own deadlines.
Both are change-of-control protections built into equity grants. Single-trigger acceleration vests some or all of the grant on the change of control alone (typically an acquisition or IPO). Double-trigger acceleration only vests on a two-step trigger: first, the change of control happens, and second, the recipient is terminated without cause or resigns for good reason within a defined window after closing (commonly 12-18 months). Double-trigger is the market standard for executives and key hires — it protects the recipient from being fired immediately post-acquisition while keeping the acquirer's retention incentive intact. Single-trigger is rare and usually reserved for founders or board-level grants.
EMI (Enterprise Management Incentive) options are a UK tax-advantaged share option scheme administered by HMRC. They allow qualifying companies to grant options to employees with significant tax savings — no income tax or National Insurance on exercise (provided the exercise price is at or above market value at grant), and Business Asset Disposal Relief at 14 percent capital gains tax on disposal (subject to lifetime limits). To qualify, the company must have under 250 employees, gross assets under GBP 30 million, and be carrying out qualifying trade activities. Each individual employee can hold up to GBP 250,000 of unexercised EMI options at any time, and the company total cap is GBP 3 million. EMI options must be notified to HMRC within 92 days of grant.
For early-stage private companies, stock options are almost always the right choice over RSUs. Options have an exercise price set at the current 409A fair market value, which is usually low for early-stage companies, so the recipient pays ordinary income tax only on the gain at exercise (or at sale if they file an 83(b) on early exercise). RSUs are taxed at vesting on the full fair market value, which means recipients owe income tax on illiquid private shares with no way to sell to cover the bill — this is why RSUs are mostly used by later-stage and public companies where there is a market to sell shares. The crossover point is typically around Series C or later, when share value is high enough that an option exercise price would be unaffordable.
Yes, but it is heavily regulated. In the US, repricing an underwater option (lowering the exercise price) is treated as a cancellation and re-grant under accounting rules, and triggers Section 409A scrutiny if the new strike price is below current FMV. Public companies usually need shareholder approval; private companies need board approval and an updated 409A valuation. Modifying vesting (acceleration or extension) is generally permitted with both parties' written agreement but should be documented as a formal amendment. Down-round protection (anti-dilution adjustments to existing grants) is rare for individual employee grants and more common in investor agreements. Always document changes through formal board approval and updated grant agreements — never adjust the cap table without paper trail.
Yes, more so than for most contracts. Equity grants intersect securities law, tax law and corporate law in ways that template language cannot always cover. Get a lawyer involved when setting up the equity plan itself (the parent stock option plan or RSU plan), when granting equity to an executive or board member, when granting cross-border (a US company granting to a UK recipient or vice versa — tax treaty implications matter), when the company is preparing for a financing or exit, or when modifying an existing grant. For routine grants under an established plan to ordinary employees in the company's home jurisdiction, a well-drafted template plus a current 409A valuation (US) or HMRC valuation (UK) is usually sufficient. Always run the 409A or HMRC valuation refresh annually or after any material event.
Download the Equity Compensation Agreement Template
This equity compensation agreement template handles every standard equity grant: ISOs and NSOs for US employees and contractors, RSUs and restricted stock awards, UK EMI options for qualifying employees, and unapproved options where EMI does not apply. Includes the standard 4-year vesting with 1-year cliff, single and double-trigger acceleration variants, post-termination exercise extensions, 83(b) election forms and 409A-compliance language. Suitable for any size of company from first grant to pre-IPO, and adaptable for both UK and US jurisdictions out of the box.
What's Included in Your Template
- Complete equity compensation agreement template in Word, PDF and Google Docs formats
- Alternative clauses for ISO, NSO, RSU, RSA and UK EMI option grants
- 4-year vesting with 1-year cliff (and milestone-based variants)
- Single-trigger and double-trigger acceleration drop-in clauses
- Post-termination exercise window options (90 days to 10 years)
- Section 409A compliance language and 83(b) election form (Exhibit C)
- UK EMI HMRC notification reference and Section 431 election language
- ROFR, drag-along and IPO lock-up transfer-restriction clauses
- Notice of grant (Exhibit A) and exercise notice (Exhibit B) templates
Why Founders Choose This Template
- Hand-drafted: Written by founders for founders, with input from equity counsel in both jurisdictions
- Dual jurisdiction: Works for UK EMI and US ISO/NSO grants without maintaining two separate documents
- 2026 current: Reflects current Section 409A guidance, Rule 701 thresholds, EMI scheme limits and HMRC ERS reporting requirements
- Plain English: Drafted to be readable by recipients without legal training; tax provisions explained clearly
- Cap-table-ready: Field structure mirrors Carta, Capdesk and Pulley grant entry forms for clean data sync
- Founder-friendly pricing: One small fee for unlimited use, not per-grant or per-recipient
- Editable everything: Word, PDF and Google Docs — edit in whatever tool you use
This template is provided as a starting point and is not legal or tax advice. Equity compensation tax treatment varies by jurisdiction and individual circumstances. For executive grants, cross-border grants, repricing, or any grant ahead of a financing round or exit, have equity counsel and a tax advisor review before use. Section 409A and EMI compliance both depend on a current valuation — refresh annually or after any material event.