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This page explains how to create employee stock option plans and manage them on QuotaBook.
Here we will explain how to:
Create employee stock option plans
Create customized vesting schedules
Grant stock options
Creating Employee Stock Option Plans
Please note that if you are granting stock options for the first time on QuotaBook, you must first create 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 others. Please 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 additional new option plans
If you wish to issue stock options as other share class types besides new equity such as cash, please add a separate option plan for this intended use
What is an Employee Stock Option Plan (ESOP)? Think of it as an 'employee-based equity basket' where you keep stock options before your vesting occurs. Each plan must the folowing fields filled: i) Option Plan Name; ii) Plan Type; and iii) Options Authorized
Option Plan : Give your option plan a name - (e.g. Option Plan 2020)
Plan Type : Select an option plan type: 1) New Stocks: When entirely new stocks will be issued during the vesting phase 2) Existing Stocks: When existing stocks (secondaries) will be transferred to the stock option recipient during the vesting phase 3) Cash: When difference between strike price and and stock price will be paid in excess 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 signed 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 to your plan.
Creating Vesting Schedules
Typically, even after granting stock options to employees through grant letters and signatures, they do not own shares and cannot exercise their rewarded shares right away. Granted stock options usually undergoes a fixed vesting period before these shares are eligible to be exercised. The total number of options can be vested increases over time on a schedule. A schedule depicts the cliff period and how the options will be vested is called a vesting schedule.
A vesting schedule determines the timeline of when and how the options will be vested, depending on terms such as employment duration and milestones. Each option plan or grant may have its own specific vesting schedule.
The most commonly used is a time-based vesting schedule that allows employees to proportionally earn their shares over a time. Time-based vesting schedules often have a cliff period, which is the duration of time before the first promised equity portion is vested. The remaining options are proportionally vested over time, typically every month or a quarter.
Example: 4 Year Vesting Schedule with 1 Year Cliff with a total of 1,000 shares - meaning the employee will have vested 250 shares a year after the grant date and the remaining 750 shares will be vested proportionally over the course of the remaining three years.
1) Rate : Vesting occurs at a percentage rate based on how many months/years have passed
Schedule Name: One format we recommend is "Total Length / Cliff Length, Cliff Percentage / Vesting Frequency, " but you can always reset these names 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% / Quarterly
Details: Input the frequency by months/years and the vesting rate the schedule will occur at - please note that the sum of the "Vesting Rate" values must total to 100%
Fractional Shares: Round up or down based on the desired fractional share leftover amount (example: Round Down: 114.5 shares -> 114 shares, Round Up: 114.5 shares -> 115 shares)
Expiration Date: Set an expiration date for the vesting schedule (typically 10 years from Grant Date)
2) In Fraction (1/N) : 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.
3. Preview/Simulate the Newly Created Vesting Schedule
4. Edit and Manage Inputted Vesting Schedules -> [Vesting Schedules]
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 Individual You Wish to Grant Options to.
3. Select an Existing Option Plan.
Or click [Create Option Plan] button below and follow this guide above to add a new one directly from here.
4. Fill Out the Rest of the Grant Information.
Quantity: Number of stock options to grant
Exercise Price: Set price at which the grantee can exercise their stock options
Currency: Currency in which stock options will be issued
Grant Date: Date stock options are granted
Expiration Date: Date before which all of the grantee's stock options must be exercised
Vesting Schedule: Select an existing vesting schedule or create a new one by clicking [Create Vesting Schedule]
5. Add Relevant Files/Documents By Selecting [Add New].
6. Select [Submit] and You Have Now Successfully Granted Options!