Q&As

What is ‘sweat equity’ and how is it used in a private equity or venture capital context?

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Published on LexisPSL on 27/11/2019

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • What is ‘sweat equity’ and how is it used in a private equity or venture capital context?

What is ‘sweat equity’ and how is it used in a private equity or venture capital context?

‘Sweat equity’ can refer to where shares are given to managers/founders in either a management buyout (MBO) or venture capital (VC) context, not in return for cash, but based on the recipient’s effort and contribution to the MBO/VC 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.

Therefore, in this

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