Introduction
Cash settlement allows employees to receive the cash value of their equity grants instead of actual shares. This is common with phantom shares and can also apply to stock options when employees want to realize the value without exercising and holding shares.
When you cash settle a grant, the employee receives a cash payment equal to the value of their vested equity, and the settled portion is removed from their grant (and optionally returned to your equity pool).
This article explains what cash settlement is, when to use it, and how to process cash settlements in Ledgy.
Who can cash settle grants: You need to be an account admin in Ledgy to cash settle equity grants.
How to cash settle a grant
Step 1: Navigate to transactions
Go to Ownership > Transactions in your Ledgy dashboard.
Step 2: Find the grant
Locate the grant you want to cash settle. You can use the search bar or filters to find the specific grant transaction.
Step 3: Access the cash settle option
Click the Three Dot button next to the grant you want to settle.
Select Cash Settle from the menu.
Step 4: Enter settlement details
In the cash settlement window, you'll need to enter:
Settlement amount
The number of options/units you want to cash settle
This cannot exceed the vested amount available
Ledgy will show you the vested balance available for settlement
Settlement date
The date when the cash settlement occurs
This is typically the payment date
Settlement value (if applicable)
The cash amount paid to the employee
This helps track the total cash outflow
Step 5: Choose return to pool option
You'll see a checkbox for "Return to pool".
If checked: The settled amount is returned to the equity pool, making it available for future grants.
If unchecked: The settled amount is removed from the grant but not returned to the pool.
When to return to pool:
If you want to reallocate the settled equity to other employees
When maintaining a specific pool size for future grants
As part of your equity budget management
When not to return to pool:
If you're reducing your total equity allocation
When the pool is already fully allocated
If company policy doesn't allow reuse of settled equity
Step 6: Add optional information
You can include:
Documents
Attach settlement agreements or payment confirmations
Upload any relevant supporting documentation
Internal notes
Add notes about the settlement reason or circumstances
Record any special terms or conditions
Step 7: Save the cash settlement
Click Save to create the cash settlement transaction.
The settlement is automatically linked to the original grant, and the grant's available balance is reduced by the settled amount.
Understanding cash settlement transactions
Automatic linking
Cash settlement transactions are automatically linked to the original grant in Ledgy. This maintains a clear audit trail showing:
The original grant amount
How much has been cash settled
How much remains available
The complete history of all settlements
Multiple settlements
You can cash settle a single grant multiple times. This is useful when:
An employee wants to partially cash out over time
Company policy allows quarterly or annual partial settlements
Vesting schedules result in periodic settlement opportunities
Example: An employee has 10,000 phantom shares vesting over 4 years. They might cash settle 2,500 shares each year as they vest, creating four separate cash settlement transactions all linked to the original grant.
How to process bulk cash settlements
If you need to cash settle multiple grants at once, you can use Ledgy's bulk import feature to process them efficiently.
Step 1: Navigate to transactions
Go to Ownership > Transactions in your Ledgy dashboard.
Step 2: Access the import feature
Click the Import button in the top right corner.
Step 3: Select the cash settlement template
In the Template dropdown menu, select Cash settlement.
Step 4: Download and complete the template
Click Download template to get the Excel file.
Follow the guidance provided in Step 2 of the modal to fill in the template correctly. The template includes columns for:
Stakeholder name or identifier
Grant reference or transaction ID
Settlement date
Number of units to cash settle
Whether to return settled amounts to pool
Any additional required fields
Important tips for bulk imports:
Ensure stakeholder names match exactly as they appear in Ledgy
Verify grant references are correct
Double-check settlement amounts don't exceed vested balances
Use consistent date formatting
Step 5: Upload and import
Once you've completed the Excel template:
Save the file
Return to the import modal (Step 3)
Drag and drop your completed file into the upload area, or click to browse
Click Import now to process the bulk cash settlements
Ledgy will validate the data and create individual cash settlement transactions for each row in your template. After the import completes, you can review the newly created transactions in your transaction history.