• Law Office Sung

Startups Entering the U.S. Market 101 (3) – Vesting (ENG)

2020.10.8.



Conditional Incomplete Stock Grant (Vesting)


​Startups can issue outright stocks that can be exercised immediately, but they can also issue stocks on a vesting condition. Grantees of the outright stocks take a full ownership on the day they are granted and there is no risk of losing their stocks in the future. However, the grantees of the stocks on a vesting condition may have to forfeit their stocks or the company may repurchase their stocks if certain conditions are not met.


​Startup founders ideally want to receive the outright stocks of the company they own. If they work unpaid for the company, they feel even more reluctant to receive stocks on a vesting condition. However, startup founders need to understand that issuing stocks on a vesting condition from the initial issuance of stock may be in the best interest of both the company and the founders themselves.


First, there may be members who suddenly depart the company after receiving outright stocks without completing the role they initially promised. There is no guarantee that the startup founders’ unity will last forever. Often times, there might be a serious conflict between the founders over how they operate the company, and they may want to go their separate ways. Especially if the company performs poorly with no profits generating and no investments being made, some of the founders may want to relocate to a job that will pay them immediately. Furthermore, there is no guarantee that conflicts and divisions among the founders will not happen in the early stage of business, perhaps just one day after the stocks are issued. As a result, granting a full ownership of stocks after a certain period of time following the stock issuance (after the founders have completed some of their respective roles and tasks promised in exchange for stocks) is a way to minimize further conflicts.


​Second, if the situations mentioned above do occur, the company needs to seek a replacement for a member leaving the company. In such cases, if the company reissue stocks and grant it to the new member, the stocks of the founding members may be diluted. In other words, if a founding member of the company suddenly leaves the company after receiving a full stock, the remaining members will not only struggle to complete the incomplete tasks, but the value of their stocks will be lowered, and it causes an unfair consequence.

Finally, investors prefer companies that issued stocks on a vesting condition. Many VCs cannot help but to take into consideration the startup founders’ skills, ability, and commitment to the company when selecting companies to invest in. They obviously seek to invest in a startup with founders who have strong motivations for success rather than a startup with founders who already have outright stocks and can leave the company whenever they want or a startup that allows certain members to freeride off of other employees’ efforts. As a result, in the long run, if a startup wants to attract VCs or other institutions, it is ideal for the company to consider issuing stocks on a vesting condition.

Recent Posts

See All

2022. 6. 7. 만약 이 글을 읽는 당신이 캘리포니아에 살고 있는 피고용인(employee)이라면 운이 좋다고 말할 수 있다. 캘리포니아는 미국 50개 주 중에서 가장 피고용인에게 유리한 노동법 내지 근로기준법을 제정하고 있는 주 중에 한 곳이기 때문이다 (물론, 캘리포니아의 높은 물가와 미친 렌트비를 감당할 자신만 있다면 말이다!). 반대로 이야

2022. 5. 31. 벤처캐피탈(VC)을 통하여 투자유치를 받으려는 스타트업들은 투자계약서 서명 전 실사자료 제출요구를 받게 된다. 일반적으로 제출이 요구되는 실사자료들은 아래와 같으며, 각 벤처캐피탈(VC)에 따라 추가서류 제출을 요구하는 경우도 있고 경우에 따라서는 이 중 일부의 제출만으로도 실사가 완료되는 경우가 있다. ​ 1. 이사회와 주주총회의

2022. 5. 23. 직접 상표출원을 한 많은 분들이 USPTO(미국특허상표청)로부터 Office Action(OA: 중간심사통지)을 받고 나서 변호사를 찾아오시는 경우가 많다. 그 중 많이 등장하는 중간심사통지의 사유 중 하나가 바로 선행출원 상표가 존재인데, 이번 글에서는 선행출원 상표가 존재한다는 것이 정확히 무엇을 의미하며 어떻게 대응하는 것이 좋