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This page explains how to create employee stock option plans and manage them on QuotaBook.
This page explains how to:
Create employee stock option plans
Create vesting schedules
Grant stock options
Create an employee stock option plan
Please note that if you are granting stock options for the first time, you need to start by creating option plans and vesting schedules.
You can add different types of option plans depending on how they will be managed:
We generally recommend starting out with one option plan before adding more plans. In this case, set the number of "options authorized" as the maximum number of options company can grant.
When you close future rounds and end up with a bigger option pool as a result, you can edit the maximum number of "options authorized" from the original option plan or you can create new option plans.
If you wish to issue stock options as types other than new stocks (ex. as cash), add a separate option plan.
What is an Employee Stock Option Plan (ESOP)? Think of it as a 'bucket' where you keep stock options before your company starts issuing them. Each plan must have a total number of options to be authorized and a plan type.
1. Go to [Securities] → [Options] → [Manage Option Plans] → [Create Option Plan]
2. Fill out all the necessary information.
Option Plan : Give your option plan a name you can remember (e.g. Option Plan 2020)
Plan Type : Select an option plan type. 1) New Stocks : When new stocks will be issued at the strike price at the time of exercise 2) Existing Stocks : When transferring existing stocks (secondaries) at the strike price at the time of exercise 3) Cash: When difference between strike price and and stock price will be paid in cash
Options Authorized : Input the total number of options you can grant to your employees. If you manage only one option plan, this should be equal to the total option pool.
Approval Documents : If applicable, attach documents such as employee share option plan documents approved by the Board of Directors
Note: Please note that local regulations might be applied to the number of stock options the company can award. Refer to your option agreements and relevant documentation to correctly reflect these rules on your plan.
Create a vesting schedule
Typically, even after granting stock options to employees through grant letters and signatures, they do not own shares and cannot exercise stocks right away. Stock options that were granted must be first vested to the employees before they can actually exercise, sell and cash out. The number of options that are vested increases over time on a schedule. Setting a schedule on how the options will be vested is called a vesting schedule.
A vesting schedule determines when employees are vested and how many, depending on terms such as employment duration and milestone. Each option plan or a grant may have its own vesting schedule.
The most commonly used is a time-based vesting that allows employees to earn their shares over time. Time-based vesting schedules often have a cliff, which is the duration of time before the first promised portion of the stock is vested. The remaining options are gradually vested over time, typically every month or a quarter.
∘ Example: 4 Year vesting schedule with 1 year cliff (total 1,000 shares) means that employee will be vested 250 shares after a year of option grant, and the other 750 will be vested equally over the course of the remaining three years.
In order to manage vesting schedules on QuotaBook:
1. Go to [Securities] → [Options] → [Manage Vesting Schedule] → [Create Vesting Schedule].
2. Choose from four vesting schedule types.
1) Time-based (linear) : If the same amount of stocks are awarded every certain period (e.g. 50% after 2 years, then 12.5% every 6 months).
Schedule Name: One format we recommend is "Total Length / Cliff Length , Cliff Percentage / Vesting Frequency, " but you can always set based on your needs. ∘ For example, for stock options vested over the course of 4 years, with 2-year cliff of 50% cliff vesting and annual vesting afterwards: 4yr / 2yr cliff, 50% / Annual or 4yr / 1yr cliff, 25% /Quarterly
Vesting Frequency: Select how often vesting occurs from Daily/Weekly/Monthly/Every 2 Months/Every 3 Months/Every 6 Months/Every 12 Months
Total Length: The time period between the grant date and the date at which 100% of the awarded stocks can be exercised (stocks are fully vested).
Cliff Length: The total length of cliff - the duration before the first portion of the stock is vested.
Cliff Percentage: The percentage of stocks vested once the cliff is over.
Immediate Vesting: The percentage of exercisable stocks on the grant date. If you do have a cliff, ignore this as there would be no immediate vesting on grant date.
2) Time-based, (non-linear) : If vesting is done over a certain period of time (e.g. every quarter or every six months) but the amount vested is not linear and is different (e.g. 40% after 2 years, 60% after 3 years).
Schedule Name: One format we recommend is "Total Vesting Length / Vesting Length 1, Percentage 1 / Vesting Length 2, Percentage 2 / ... Vesting Length N, Percentage N" but you can always set based on your needs. ∘ For example, for options vested over the course of 4 years with first 20% vested after 2 years, and 40% each vested annually: 4yr / 2yr, 20% / Annually, 40%
Length: For the first vesting, enter the time period starting from the grant date. Next, enter the time period up until the next vesting date.
Vesting Frequency: Unit for the vesting length (Year / Month / Day).
(Vesting) Percentage: Percentage of stocks vested on the vesting date. The total sum of vesting percentages must equal to 100%.
To add more vesting frequencies, click on the [Add Vesting Condition] button.
3) Milestone-based : If vesting is linked to specific milestones as incentives and not time (e.g. sales performance, marketing KPIs).
** Please note that you must manually vest stock options when the milestones are achieved.
Milestone: Specify the milestone conditions to which stock options are vested.
(Vesting) Percentage: Percentage of stocks vested upon achieving milestone. The total sum of vesting percentages must equal to 100%.
To add more vesting conditions, click on the [Add Vesting Condition] button.
4) Custom : If vesting is not linked to time or milestones (e.g. event-based vesting).
** Please note that you must manually vest stock options on a custom schedule.
Specify the agreement in the Details section.
If you have any questions on setting up schedules, feel free to reach us at firstname.lastname@example.org or through the chat support button on the bottom right corner.
3. You can always check, edit and manage various vesting schedules from [Manage Vesting Schedule].
Click [⋮] button on the right to see the details of each schedule.
Grant stock options
Once you have successfully created your option plan and vesting schedule, you are now ready to grant and record options on QuotaBook.
1. Go to [Securities] → [Options] and click [Grant Options]
2. Select the employee you want to grant options (grantee).