Before promising equity to a hire, decide what the business intends to offer and what process will make it effective. An informal percentage in an offer conversation can leave important questions unanswered.
This guide is general preparation information. Scheme eligibility, tax treatment, approvals and employee rights need advice for the relevant jurisdictions.
Define the intended incentive
Identify the recipients and why the business wants to offer equity: long-term retention, recruitment or a specific contribution. Record the proposed grant, vesting intention and any conditions in language counsel can review.
Clarify what a percentage means. Which ownership calculation is being used? What assumptions include outstanding investment instruments and the planned pool? Ask advisers to explain the figures before using them in an offer.
Gather company and recipient facts
Prepare the cap table, existing equity documents, investment terms and current commitments. List where recipients live and work, their employment or advisory role and any expected relocation.
For Australian employee share schemes, the ATO describes a start-up concession subject to eligibility conditions. Being an early-stage business does not by itself establish qualification. ATO start-up concession.
Ask tax advisers to review the company, instrument and recipient facts, including valuation and timing. Overseas recipients may need separate advice; Australian treatment should not be assumed to determine their position.
Ask for an implementation plan
Have counsel and tax advisers explain the documents, approvals, valuation work, reporting and deadlines relevant to the intended arrangement. Allocate a person to each step.
If a hire starts before the process is complete, make the status clear. Record the intended arrangement accurately without telling the recipient that an unsigned or unapproved grant has already been made.
Plan ongoing administration
Maintain a record of grants, vesting, exercises, departures and amendments. Ask how the plan treats leave, a change in working role, termination and a possible sale. Those outcomes depend on the documents and applicable law.
Provide recipients with an understandable explanation of the actual offer. Avoid guaranteed-value claims or predictions about an exit. Keep a channel for questions and give them space to seek their own advice.
Keep fundraising records consistent
Reconcile equity commitments with the cap table and data room. A planned pool and completed individual grants should be distinguishable.
Read fundraising readiness for transaction records and founder agreements for the related ownership discussion.
General information for planning a conversation with qualified advisers. It is not legal advice for your circumstances. Scope, jurisdiction and fees are agreed before any engagement.