What is a vesting schedule and how do you input the information on the application?

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. 

Vesting schedules:

Standard time-based 

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.

Milestone based-vesting

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

Here at Firstbase.io, we are only able to help with templates for the standard time-based vesting schedules. All you all need to do is click on the "Ownership" task on your account or provide it throughout the application workflow. 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!