Milestone and Variable Time-based Vesting Schedules

Introduction

In addition to standard time-based vesting schedules, the platform allows you to create milestone and variable time-based vesting schedules. These types of vesting schedules allow you to select irregular vesting time periods, or to set up certain conditions that must be met before shares will vest. This article will explain how to select milestone/variable vesting for new grants, defining the custom milestones and vesting events, and how to capture milestone completion. For more information about vesting schedules, please see this article.

Selecting Milestone/Variable Vesting

Setting up a milestone or variable vesting schedule is done in two parts. First, when running the Grant Shares workflows, select Milestone/Variable Vesting as the Vesting Type.

When the workflow is complete, you will need to define the milestones. Follow the steps below to define a custom time-based vesting schedule or a milestone vesting schedule. 

Defining Milestones/Variable Vesting Conditions

After a grant has been issued with milestone or variable time-based vesting, the milestones and the time-based periods must be defined. Follow the steps below for time-based vesting or milestone vesting. 

Custom Time-Based Vesting

1. From the Company Workspace, go to Start New Workflow Equity Capture Vesting Events or Milestones.
2. Enter the name of the grantee and select the grant.
   
3. For the Vesting Type, select Custom Time-Based Vesting.
   
4. Select if there is a vesting condition and enter the details. This works as a milestone in that the time-based vesting events will not happen until this condition has been marked as completed. 
5. Click Add to define the vesting events. Select the date and number of shares that will vest, and click Save
   
   Note that the vesting events must add up to the total of the shares granted. You will get an error if there are not enough shares added.
6. Once all vesting events have been added, click Continue to finish the workflow.

Milestone Vesting

1. From the Company Workspace, go to Start New Workflow Equity Capture Vesting Events or Milestones.
2. Enter the name of the grantee and select the grant.
   
3. For the Vesting Type, select Milestone Vesting.
   
4. Click Add to define the milestones. Enter the number of shares, a title, and description of the milestone. Select Update Definition for Future Use if you want to save the details of this milestone for use on other grants.
   
   Note that the vesting events must add up to the total of the shares granted. You will get an error if there are not enough shares added.
5. If the milestone has been resolved, select Yes and enter the details if the milestone has been met or not met. You can come back to this step at a future time, as explained in the next section,
6. Click Save. When all milestones have been added, click Continue to finish the workflow.

Capturing Custom Vesting Events and Milestones

When a grant has a milestone vesting schedule, you will need to manually capture any vesting events. Even if a milestone was not successfully met, you can capture the failure to forfeit those pending shares.

1. From the Company Workspace, go to Start New Workflow Equity Capture Vesting Events or Milestones.
2. Search for the grantee and select the grant.
3. A list of all milestones for the grant will display. Click the Edit icon for the milestone.
   
4. Select that the milestone has been resolved and enter the details. If the milestone has been met successfully, enter the date and number of shares vested. Otherwise select the date of the milestone failure.
   

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Screenshots are for illustrative purposes only.

Fidelity provides cap table management and other administrative services to private companies and their equity compensation plans.

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