Sage-Tips

What happens to vested RSUs When you leave a private company?

A: Generally, if you leave your company before your RSUs vest, you lose the unvested RSUs. The RSUs that have already vested you will continue to own.

Can I cash out my employee stock options?

If you have been given stock options as part of your employee compensation package, you will likely be able to cash these out when you see fit unless certain rules have been put into place by your employer detailing regulations for the sale.

Do stock options expire?

According to the stock option agreement, there is a particular time period, within which you should exercise your options or else they will expire (typically 10 years). If you leave the company for a new job, retire, or get laid off, then you typically have a window of 90 days to exercise your options.

What happens when a stock is vested?

In employee compensation, vesting stock refers to shares held by an employee that were granted either through employee stock options (ESOs) or restricted stock units (RSUs), that is not yet earned by the employee. Vesting is a legal term that means the point in time where property is earned or gained by some person.

What happens to a startup employee’s stock options when the company gets bought?

If the acquiring company decides to give you company shares, either you will receive publicly traded shares, and your situation will mimic the IPO outcome, or if acquired by a private company, you will receive private shares and you will be back in the same situation as before: waiting for liquidity.

What happens to vested stock options when you leave a company?

If you have vested stock options (incentive stock options (ISOs) or non-qualified stock options (NQSOs)) that you have not exercised, you may have the opportunity to do so before you leave the company or within a defined period of time after your departure from the company.

How long do you have to stay in a company to vest?

In most cases, you have to stay for at least a year to vest any equity (your grant may call this a “one year cliff”). When you leave a company, only your vested equity matters. Say your company grants you 4,000 ISOs that vest over a four year period and come with a one-year cliff.

What happens to your stock when you leave a startup?

If you work for a startup, often the greatest value of your stock will follow an exit event such as a merger or acquisition or an IPO. However, if you leave the company before one of these exit events, you may miss the upside, even if you’ve already exercised your options.

How long do I have to exercise my vested options?

If you leave your company voluntarily, either to retire, to take another job, or to take a break from work, you generally have up to 3 months or 90 days from your termination date to exercise your vested options. (As always, check your plan document as this period can be shorter or longer.)