Intro

Vesting is the process by which an employee or stakeholder gradually earns full ownership of equity (like stock options or shares) over time, typically based on a schedule with a cliff period and regular vesting intervals. This incentivises long-term commitment to a company. Vesting can be time-/service-based and/or performance-based and come with single or multiple triggers. On Ledgy, one can configure any vesting schedule, both time- and performance-based and a mix thereof. This can be done in our centralised Vesting page.

To create your performance-based vesting conditions in a central hub, head to Equity Plans > Vesting (see below). These conditions can then be attached on a Plan/Scheme or individual Grant level. If the conditions are met, you can mark them centrally as (un-)achieved, and these conditions will also be marked as fulfilled in all connected transactions.

Creating a performance condition

Go to Equity Plans > Vesting > Click Create condition at the top right.
Define the performance condition settings.
1. Name
2. Type
  1. Event-based: Used for binary trigger events like M&As, product launches, IPOs or other exit events.
  2. Non-market performance: Based on internal metrics like revenue or EBIT margin.
  3. Market performance: Tied to stock or market metrics like Total Shareholder Return (TSR). See above for an example.
3. (Optional) Start measurement date: The date on which performance tracking begins for the specified condition. Select the date to establish the beginning of the measurement period. This is also critical for Share-based payments/IFRS2 (i.e. expensing of equity compensation)
4. (Optional) Target evaluation date: The established date for evaluating the condition, used as a provisional vesting date in financial reporting and can optionally be displayed to stakeholders in the vesting breakdown. This is also critical for Share-based payments/IFRS2 (i.e. expensing of equity compensation)
5. Display target date to stakeholders: Select 'Yes' to display the target date in the vesting breakdown for stakeholders to provide a clear timeline. If 'No' is selected, this date remains internal.
6. (Optional) Condition details: Enter details you want stakeholders to see in a tooltip on their dashboard. This could include key terms, condition specifics, or other relevant information.
Click on Create to save the performance condition.
Click on Publish changes to go live with the newly created/modified performance conditions to make them available for your transactions.

Editing performance conditions

By clicking on the three dots on the left, you can edit, evaluate, duplicate and delete your performance conditions. Any changes will have to be re-published. See above.

Apply performance conditions to equity plans

Go to Equity Plans > Pools & Plans > Add or edit plan.

You can now attach the newly created/modified Performance condition to a Plan.
- You can add as many vesting conditions as needed.
- Each condition may have a different weight. All conditions will have to sum up to a weight of 100%.

Each time you award grants from this Plan, the grants will inherit the vesting performance conditions.

Note: In the same way, you can also add performance conditions to individual grants.

Apply performance conditions to transactions

Go to Ownership > Transactions > Add or edit transactions
Add vesting condition(-s) in the Vesting section.
You can add a single vesting condition or multiple vesting conditions.
1. Select Performance condition to add a single vesting performance condition.
  - In the drop-down menu, you will find all your performance conditions
Click Save.

Evaluate performance conditions

Go to Equity Plans > Vesting > Click the three dots from a performance condition > Evaluate.
Choose the status of the performance condition:
1. In progress: This is the default status. This is particularly true, if you find yourself in the middle of the Start measurement and the Target measurement date.
2. Achieved
  1. Achieved date: Acts as the final vesting date if no other vesting conditions are pending; otherwise, marks the actual evaluation date
  2. (Optional) Condition details: Enter details you want stakeholders to see in a tooltip on their dashboard. This could include key terms, condition specifics, or other relevant information.
3. Unachieved
  1. (Optional) Condition details: Enter details you want stakeholders to see in a tooltip on their dashboard. This could include key terms, condition specifics, or other relevant information.
Click Evaluate to save the changes.
Publish the changes to apply the achievement to all connected transactions and to inform your stakeholders.