This article will cover a few frequently asked questions about 409A valuations. See this article for a step-by-step guide to requesting a 409A Valuation, or you can download our 409A Valuation Guide for Private Companies.
Do I need a 409A to grant shares or options? Who needs to approve this?
Option grants (and shares) issued under a Stock Incentive Plan must be approved by your company's Board of Directors. To do so, the Board must establish the Fair Market Value (FMV) of the shares to set an exercise price, which is the price the option holder will pay when they purchase or exercise their stock. The FMV set by the board of directors is generally determined by using one of two methods:
- The Board approves a resolution (typically drafted by the company’s lawyer) that lists all the factors the Board considered in establishing FMV and then another resolution to set the per share price.
- The company pays for a valuation expert to prepare a detailed 409A Valuation Report, and the Board adopts the FMV established in the report.
Who prepares the 409A report?
We partner with third-party 409A Valuation Report providers based on each company's individual needs.
How long does this process take?
Getting a 409A takes approximately 2 weeks. However, this is contingent on your company responding to requests for support materials and answers to outstanding questions in a timely manner. You’ll want to leave yourself some time to answer questions as they come in.
What does the 409A process look like?
- Request a 409A Valuation Report and pay the associated fee.
- Answer the survey questions and provide documents (be prepared by glancing at our 409A Step-by-step Guide).
- We send survey answers and the documents to the 409A Valuation Report provider.
- Provider reviews the survey answers and documents. If needed, the provider will contact you directly to request more information and/or documentation.
- We will email you when the draft of the valuation report is ready for your review.
- Return to the workflow to review and accept the draft of the valuation report.
- We will email you when the final draft is in your account.
- The system will generate a board resolution to accept the FMV as defined in the 409A Valuation Report.
What if I need a second 409A during my subscription year?
One 409A Valuation is included in your Growth or Scale subscription cost, and additional valuations can be purchased for a fee. The fee depends on the number of stock classes you have and is broken down below:
- Two or less: $1,229
- Three: $1,899
- Four or more: $3,199
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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