Vesting is a legal term used in companies to earn or offer the rights for a future or present payment, benefit or asset over a specific period of time.
Vesting is often used for retirement plans, in real estate and also when offering shares as a form of employee compensation. Vesting of shares is common tool used by startup companies.
With these vesting of shares set over a specified time period, employees would only receive the rights to these shares after working for a time in the company. In other words, the vesting of shares ensures that you have served in the company for enough time to earn the rights to the stocks and equity benefit plans.
With the Eqvista application, you would be able to easily create vesting periods for the shares you offer your employees. Typically, it takes a period of 5 years before an employee gets this right, though it varies per the company’s needs and the compensation plan.
Let us take an example to understand Vesting. In case you are an employee in a company and get a bonus of 1,000 shares, these shares would vest over a period of 5 years. With this plan, you can vest about 200 shares on the first anniversary, with the other 800 shares remaining unavailable until you work longer for the company.
Such plans of vesting shares are offered by startup companies to employees, vendors, contractors and others working with the company. This is normally done to keep these people dedicated and focus on company’s success. Anyone who leaves before the vesting period would not enjoy the benefits of owning the shares.
To know more about vesting, Eqvista can help you. Eqvista offers a FREE cap table application that can keep tracking of your dealings.As a matter of fact, Eqvista also helps you in creating vesting periods easily, taking care of adding the details to your cap table. Check out the application & contact us today!