Vesting is a legal term that means to give or earn a right to a share certificate. It means that your shareholders will only have the right to own the shares after an accruing period. The vesting can be either time or milestone-based.
A schedule is time-based (graded or cliff) if the shareholder must work for a certain period before the shares start to vest. The schedule can also be milestone-based or tied to the company's targets. Vesting in some situations can be accelerated by the board of directors or at certain events.
Please notice that vesting schedules are only applied to share certificates, option grants, restricted stocks issued by Corporations.
Four-year time-based vesting schedule with a one-year cliff, 1/4 of the shares vest after one year. After the cliff, 1/36 of the remaining granted shares (or 1/48 of the original grant) vest each month until the four-year vesting period is over. After four years, the shares are fully vested.
With milestone vesting, you get your options or shares after completing a specific project or when you and/or the company reach a business goal (e.g. the company hits a certain valuation). This type of vesting isn’t as common as time-based vesting.
You can find more about vesting schedules on our partner -Carta - website.
Applying a vesting schedule in your Firstbase.io application
Firstbase.io offers you the option to enable the vesting schedules for your shareholders during the application. You will see a toggle that can be activated if a vesting schedule should be applied to a shareholder's allocated shares. You can use this form to provide details of your vesting schedule so that our legal team can prepare the Post-Incorporation package for your company based on the information provided.
If you have any questions, do not hesitate to contact us!