{"id":7055,"date":"2014-05-21T10:00:00","date_gmt":"2014-05-21T14:00:00","guid":{"rendered":"https:\/\/www.wework.com\/creator\/?p=7055"},"modified":"2020-03-30T19:07:29","modified_gmt":"2020-03-30T23:07:29","slug":"key-equity-documents-always-file","status":"publish","type":"post","link":"https:\/\/www.wework.com\/ideas\/professional-development\/key-equity-documents-always-file","title":{"rendered":"The key equity documents you should always have on file"},"content":{"rendered":"

It’s hard to read legalese and figure out the stack of paperwork you receive when starting a new tech job. We’re here to help. \u00a0Below we provide a list of the paperwork relating to your equity compensation that you should always have in your personal records.<\/p>\n

1. The company’s equity incentive plan<\/h3>\n

The company’s equity incentive plan (sometimes called the employee stock option plan) is the document that provides for a company-wide program of awarding or granting various types of equity compensation. \u00a0The typical flavors are restricted stock,\u00a0incentive stock options<\/a>\u00a0(ISOs),\u00a0non-qualifying stock options<\/a>\u00a0(NSOs),\u00a0restricted stock units<\/a>\u00a0(RSUs), and stock appreciation rights (SARs). \u00a0Options are the most common award for employees, so this discussion will default to documents relating to options. The plan will also describe the process for granting and exercising stock options. Importantly, it will often set out some transfer restrictions, including the company’s right of first refusal.<\/p>\n

2. Grant documents<\/h3>\n

The grant documents are the ones by which the company grants you your options (or other award). \u00a0These documents typically include a Notice of Grant and a Stock Option Agreement. \u00a0The Notice of Grant will list, among other things, the number of shares for which you have an option to purchase, the exercise price, the vesting commencement date, the vesting schedule, and the expiration date of the options. \u00a0The Stock Option Agreement will describe in detail the terms of your grant, including the mechanics by which you can exercise, exactly how the vesting schedule works, and the restrictions in place around your options.<\/p>\n

3. Exercise documents<\/h3>\n

The document by which you exercise your options is usually called a Notice of Exercise. \u00a0It will include the number of shares your exercising your option for, the price per share, and the total price paid. \u00a0Sometimes, the company will also include some disclosure regarding the tax consequences of exercising your options. \u00a0The company should also provide you with IRS Form 3921, which provides the fair market value of the stock at the time of exercise; otherwise, the company should provide you with the FMV.<\/p>\n

4. Shareholder agreement<\/h3>\n

Once you exercise your options, you will often (but not always) receive and sign a Shareholder Agreement or Restricted Stock Agreement. Whereas the Stock Option Agreement governs the terms of your options, this agreement will govern the terms of your share ownership. Important provisions here include your rights for information, your right to vote your shares, transfer restrictions, and the company’s right of first refusal.<\/p>\n

5. Share certificates<\/h3>\n

Once you exercise your options, the company (actually, the company’s outside legal counsel) will issue you share certificates. \u00a0It’s important to keep the physical share certificates safely, but also keep a PDF version handy. \u00a0Take note of the legends on the certificates, which contain important information about transfer restrictions.<\/p>\n

6. Company by-laws<\/h3>\n

Recently, some companies have started including provisions in their by-laws that materially affect your rights as a stockholder. \u00a0Such provisions include restrictions on your ability to sell your shares and hoops you’d have to jump through to do so. For this reason, it’s good to request the by-laws from the company or at least get written confirmation that there are no provisions that materially impact your rights as a shareholder.<\/p>\n

7. Separation letter<\/h3>\n

If you leave the company, the company will usually provide a separation letter (often called a Letter of Termination; don’t worry, it’s technically called termination even if you resign). \u00a0It’s important to read this carefully and keep it on file. \u00a0If you have options, the separation letter will inform you how many options you have vested, the exercise price, and how long you have to exercise those options (for ISOs, it is 90 days from your last official day of employment).<\/p>\n","protected":false},"excerpt":{"rendered":"

It’s hard to read legalese and figure out the stack of paperwork you receive when starting a new tech job. We’re here to help. \u00a0Below we provide a list of the paperwork relating to your equity compensation that you should always have in your personal records. 1. The company’s equity incentive plan The company’s equity […]<\/p>\n","protected":false},"author":974,"featured_media":7061,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[43902],"tags":[],"class_list":["post-7055","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-professional-development"],"acf":[],"yoast_head":"\nThe key equity documents you should always have on file<\/title>\n<meta name=\"description\" content=\"It's hard to read legalese and figure out the stack of paperwork you receive when starting a new tech job. 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