Sweat equity definition

This can refer to where shares are given to managers/founders in either a MBO or venture capital context, not in return for cash, but based on the recipient’s effort and contribution to the MBO/venture capital project. Here, the intention is to reward the company’s management/founders by providing them with stakes in the relevant business for their past and continuing efforts within such enterprise. Such arrangements will typically involve an allotment and issue of shares by an investee company (usually a private limited company) to managers/founders for non-cash consideration. Such consideration can take many forms, eg the relevant provision of services by such managers/founders to such investee company, their continued involvement in the business affairs of such company etc. The specific nature of such consideration will be agreed by the relevant parties to the transaction.