· Granting Shares or Options Under Stock Incentive Plan Workflow

Introduction

This article will provide insight and step-by-step instructions for the Grant Shares or Options Under Stock Incentive Plan workflow. See this article for instructions on how to Grant Shares Outside of the Plan.

Granting equity to employees, consultants, advisors, and others is fully automated. The system has an automated workflow to set up a grant with just a few key pieces of information—your company's fair market value (FMV), recipient name, number of shares, your Stock Incentive Plan (SIP), and vesting information, if applicable. You can learn more about the different types of grants available in our blog post. 

This article covers using the generative path in the workflows. If you would like instructions on how to upload granted shares, follow the steps below but select Upload Previously Awarded Stock or Option Grant on the first screen. Instructions can be found here on how to upload a single custom grant document to be sent out for signature.

Click the links below to navigate to the sections of this article:

• Running the Grant Shares or Options Under the Stock Incentive Plan workflow
• Frequently Asked Questions

Granting Shares or Options Under the SIP

Below you will find information about each step in the Grant Shares workflows (in order):

• Getting Started
• Select Stock Incentive Plan
• Define Source for Fair Market Value (FMV)
• List Grant Recipients
• Constraints Check
• Approvals
• Checkpoint
• Signature Collection
• Wait For Grant Acceptance
• Evidence of Share Purchase

Getting started

From the company workspace click on Start a New Workflow. The Grant Shares Under the Plan workflow is located in the Equity section of the available company workflows. Note that if you do not have a SIP you will need to first establish a stock incentive plan for your company in the system prior to utilizing the workflow. 

Select Create New Stock or Option Grants and click Continue. 

NOTE: Sometimes, multiple people at a company may be running the Grant Shares workflow(s) simultaneously. If this is the case, a warning will appear on the first page of the workflow which reads "Please be aware that there are other Grant Shares or Options workflows currently underway." This helps ensure that the company doesn't unintentionally create duplicate grants.

Select the Plan

From the dropdown menu, select your plan. If your company has more than one plan established, make sure you select the correct plan from which you are issuing new grants. 

Define Source for Fair Market Value

Your company must have an established Fair Market Value (FMV) to set an exercise price for stock options. The FMV can be determined by a 409A Valuation Report, or from a board report, typically drafted by the company’s lawyer or a financially savvy board member, that lists all of the factors that the board considered in establishing the FMV. 

A company should obtain a valuation every 12 months, or following significant company events that result in material changes, such as a financing transaction, or a strategic partnership.

Reuse Existing 409A Valuation

If there is an existing 409A Valuation on file, you will be asked if you wish to use that valuation. To do this, check the box to Reuse Existing 409A and skip to the List Grant Recipients steps. Otherwise, leave this option unchecked and continue below. 

Need a valuation?

If you need a valuation, select Request a 409A Report. Selecting this option will start the process to request and accept a 409A Valuation Report. Check out our product page to learn more about getting a 409A Valuation Report. Certain clients have the cost of the 409A Valuation built into their annual subscription fee. If you choose this option, you will start a new workflow as described in the 409A Valuation Report (FMV) article. When you have completed the process, you can return to the grant shares workflow.

Already have a valuation?

Select Use Existing Report or Analysis if your company has completed a 409A Valuation or other analysis within the last 12 months and your company hasn't undergone any substantive changes, you can use the FMV established in that report and upload it in the next step. If the board has completed an analysis in the last 12 months, you can use the FMV defined in the resolution and upload the report of the analysis during the workflow.

Set Valuation Method

Select if you will upload a new 409A Valuation Report or a Board-defined Analysis and Report.

Enter Details About FMV

Enter the FMV and additional details for the 409A Valuation Report or Board Report. Check the box if you want to upload the Board Analysis Report, which will be included as an exhibit on the generated board consent later in the workflow and will be saved to the Data Room. 

Pay careful attention to the Valuation Date for the FMV. Be sure to enter the valuation date for the FMV as listed in the 409A Valuation Report or board report, not the date of the report itself. The system uses this information to determine when your FMV is out of date and needs to be recalculated.

List Grant Recipients

The system will automatically include users who were promised equity during workflows that offer an opportunity to grant stock options, such as the Add Employee, Add Consultant, or Add Advisor workflows. 

You can edit the details of the listed grant(s) by clicking the three-bar menu to the right of the listed grant and clicking Edit.

If you remove an equity promise, you will be prompted in the next step if you wish to keep or cancel the promise. If you keep the promise, it will still be visible in your cap table export and in the Equity Promises Report and will be added by default the next time you run the Grant Shares workflow. If you click Cancel Promise, you will be prompted to provide evidence of the cancellation.

To add additional grantees, click Add Grant and enter in the details of the new grant. 

If the grantee has not yet been added as a user, you can select to create a new user. The system will email the grantee inviting them to set up an account. You will want to enter the grant information and then the date the new grantee began working with the company. You will note that the system automatically checks whether a termination workflow is in progress for the employee. In some cases, the step is automatically bypassed if the user was just created during this flow. The new grantee will then be added to the list once you click Continue.

Constraints Check

The system will run calculations to help ensure your scheduled grants comply with certain requirements of your plan and the Internal Revenue code. Note that this step is informational and will not prevent you from continuing the workflow. Questions on these constraints should be discussed with your legal counsel. 

Click the arrows to view more details about the results of the constraint check. If a grant is outside of the constraints, the platform will explain the constraint, and suggest a possible remedy. 

Approvals

The grant agreements and FMV resolution, if applicable, are now ready for approval. The system will generate the new resolutions for approval by your Board of Directors. Select how to proceed with the approval. 

The first option is to Use the Fidelity Private Shares^SM generated board consent to request approval. The signatures of your Board Members will be requested as part of this workflow to approve this action. You will then be brought directly to the Checkpoint with the Board Approval document listed. 

The second option is to upload a drafted approval instead by selecting Use your drafted board consent to request approval. This option will allow you to upload an unexecuted board approval document to be sent out for signature.

Selecting Approve in a separate workflow will allow you to run the approval workflow at a later time. You will not be able to continue with the Grant Shares workflow until the approval is complete. Selecting this option allows you to bundle this and other resolutions all in one workflow. This resolution will be outstanding and queued to be included when running a Board Consent or Board Meeting Minutes workflow. 

The final option is to upload a signed approval instead by selecting This approval has already occurred. This option will allow you to select a previously executed Board approval document to approve this specific action. This document can be selected from your Data Room or uploaded.

Checkpoint

Review the documents carefully and click Edit Resolution or Edit Document if you need to make any changes to the generated documentation. If necessary, click to Share Documents with others, or select to have your legal counsel review the grant, or you can edit the emails that are sent out as part of the workflow. When you are satisfied, click Continue. Once you continue forward, documents will be released for signature and will not be available for modification.

Wait for Approvals

The workflow will pause until all required approvals have been collected for the resolutions. Once approved, the workflow will continue. 

Wait for Representative Signature

The workflow will continue once the grant agreements have been reviewed and signed by a company representative. 

Wait for Grant Acceptance

Once all company representatives have signed, the system will notify the grantees that their grant agreements are awaiting their signature.

To see additional details for any pending grants, click on Status. This window will display which tasks are pending, and you can view associated emails and documents. Click the Remind button to send an email reminder to the grantee. 

If the grant has been accepted outside of the platform, a signature page can be uploaded. If the grantee will never sign their grant in the platform, the signature process can be discontinued so you can move forward with the workflow. Note that the grant will still show on the cap table even if the signature process has been discontinued. 

After the grants are approved, recipients will accept their grants directly in Fidelity Private Shares. This is advantageous for the company as there is no danger of lost paperwork. For the grantees, it means full and easier access to their electronic stock certificate and grant-related documents. Every stockholder in your company will have their own My Equity area where they can see their vesting status, exercise their options, and even prepare their 83(b) filing. 

Evidence of Share Purchase

If applicable, the company will be prompted to upload proof of purchase, to provide evidence that the shares were paid for in full. 

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Frequently Asked Questions

How can I save standard vesting schedules so I don't have to enter them each time I grant options? 

You can save the standard vesting schedules that your company uses in the Equity Settings section of your Administration Workspace. Click the Gear icon on the bottom left corner to open the Administration Workspace. 

Click Add Vesting Schedule to enter the details of the schedule you'd like to add. Some common examples include schedules for new hires, follow on or retention grant schedules, and shorter schedules for board members or advisors. 

Enter the details required in the vesting schedule as shown below. 

Once you've saved the desired schedule(s), each schedule will be offered in the Vesting Type dropdown menu when adding a grant in the Grant Shares or Options workflow.

If I've already input my Fair Market Value in a previous Grant Shares Workflow, will it remember that and repopulate it?

If you run the Grant Shares workflow, and you input a 409A valuation, the next time you run the Grant Shares workflow, the system will ask you if you would like to Reuse Existing 409A. You can select to do so by checking the box on the screen.

If you decide not to use it, you will have an opportunity to specify how you will establish fair market valuation for these grants.  This will allow you to skip re-entering information in the Define Source for Fair Market Valuation screen, the Set Valuation Method screen, and the Enter 409A Valuation Details screen.

If you run the Grant Shares workflow and you use a Board Resolution to set the fair market valuation, the system will not allow this shortcut.  You will have to re-enter the fair market valuation details on the Define Source for Fair Market Valuation screen, the Set Valuation Method screen, and the Enter 409A Valuation Details screen every time you run the Grant Shares workflow.

I want to grant shares to someone in exchange for a service they performed for me and/or the company. How do I do that? 

You can indicate that the shares were granted in exchange for service, or any alternative consideration, during the Checkpoint of the Grant Shares workflow. Follow these steps: 

1. Click Edit Document. 
   
2. Expand the Summary of Terms section and click Grant Summary. 
3. Check Payment by Alternative Consideration. In the dropdown menu, select if shares were granted in exchange for Intellectual Property only, for Services Rendered, or you can add a Custom consideration. 
   
4. Click Save. 

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Screenshots are for illustrative purposes only.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

409A valuations are conducted by a third party.

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

Fidelity Private Shares LLC

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