If you`re an employee of a publicly-traded company, you may have heard of or even received an RSU (restricted stock unit) grant. An RSU is a form of equity compensation that gives employees the right to receive a certain number of company shares upon the achievement of certain conditions, typically vesting over time.
Before you can receive your RSU shares, you`ll need to sign an RSU issuance agreement with your employer. This document outlines the terms and conditions of your RSU grant, including the vesting schedule, the number of shares you`ll receive, and any restrictions or limitations on the sale or transfer of those shares.
The RSU issuance agreement is a legally-binding contract between you and your employer, so it`s important to review it carefully and make sure you understand the terms before you sign. Here are some key things to look for:
Vesting schedule: The vesting schedule determines when you`ll be eligible to receive your RSU shares. Most RSU grants vest over a period of several years, with a percentage of the shares becoming vested on each anniversary of the grant date. For example, you might receive 25% of your RSUs after one year, 50% after two years, and 100% after four years. Make sure you understand when your RSUs will vest and what happens if you leave the company before they`re fully vested.
Number of shares: The RSU issuance agreement will specify the number of shares you`ll receive upon vesting. This number may be fixed at the time of the grant or may be based on the company`s stock price at the time of vesting. Be sure to understand how this number was determined and what happens if the stock price fluctuates.
Restrictions on sale or transfer: Most RSU grants come with some restrictions on when and how you can sell or transfer your shares. For example, you may be required to hold onto the shares for a certain period of time after they vest or to comply with insider trading rules. Make sure you understand these restrictions and any consequences if you violate them.
Tax implications: Receiving RSUs can have tax implications, so it`s important to understand how your grant will be taxed. You may need to pay income tax on the value of the shares when they vest, or you may be able to defer taxes until you sell the shares. Your employer should provide guidance on how to handle the tax implications of your RSU grant.
Overall, the RSU issuance agreement is an important document that outlines the terms and conditions of your RSU grant. Take the time to review it carefully and make sure you understand the details before you sign. By doing so, you`ll be better prepared to make informed decisions about your equity compensation and maximize its potential value.