Introduction
A holding period is a time-based restriction that prevents shares from being sold or transferred for a specified period after they've been granted or acquired.
Holding periods are commonly used to:
Align stakeholder interests – Encourage employees and investors to stay committed to the company's long-term success
Comply with tax regulations – Meet requirements for favourable tax treatment in various jurisdictions (e.g., EMI schemes in the UK, qualified stock options in the US)
Manage liquidity – Control when and how shares can enter the market
Retain talent – Incentivise key team members to remain with the company
How it works in Ledgy
In Ledgy, holding periods are applied at the grant level, meaning each equity award can have its own specific holding period. Once set, the holding period determines the earliest date that shares from that grant become transferable.
Example: If an employee receives a stock option grant on January 1, 2024 with a 12-month holding period, they cannot sell or transfer any shares exercised from this grant until January 1, 2025 or later.
Note: holding periods apply at the transaction level and can only be applied to equity settlements and share issuance transactions.
You can check if any of your equity is subject to a holding period in the Dashboard section. Navigate to Your Equity, where shares currently in a holding period will appear in a greyed-out block, indicating they cannot yet be transferred or sold.
If any of your equity is subject to a holding period, click See details to view when the holding period ends for those shares.
What's the difference between holding periods and restrictions?
Holding periods and restrictions serve different purposes in managing equity:
Holding Periods
Holding periods are grant-specific time-based controls that determine when shares from a particular equity award can be sold or transferred.
Applied at the individual grant level
Specific to each equity award (e.g., stock options, RSUs)
Defines the timeframe during which shares cannot be transferred
Each grant can have its own unique holding period
Example: An employee receives an ESOP grant with a 2-year holding period. They cannot sell or transfer shares from this specific grant until 2 years have passed.
Restriction Periods
Restrictions are company-wide (or share class-specific) rules that prevent certain transaction types across your cap table.
Applied broadly across the company or to specific share classes
Controls which types of transactions are permitted
Affects all stakeholders subject to the restriction
Typically used to enforce regulatory requirements or company policies
Example: A company implements a restriction preventing all secondary transfers during a funding round, affecting all shareholders regardless of when they received their equity.
Please see the following article to learn more about Restriction Periods.
Key Takeaway
Think of holding periods as individual timers on specific grants, while restrictions are overarching rules that apply across your entire company or share class.