Introduction
Dividend equivalents allow you to distribute dividends to grant holders who don't yet own shares by converting the dividend value into additional grant units rather than paying cash. This ensures grant holders benefit from dividend events whilst keeping their entitlements aligned with the original grant's vesting schedule. Dividend equivalents are configured at the equity plan level and can apply to vested units, unvested units, or both.
This guide walks you through enabling dividend protection, creating a dividend event, and generating the resulting grant transactions.
Dividend equivalents let you reward grant holders when your company declares a dividend, even if they don't yet hold shares. When you enable dividend protection on an equity plan, you can create dividend events that automatically calculate how many additional grant units each eligible stakeholder should receive based on the dividend value and a reinvestment price. You control whether the dividend applies to vested units only, unvested units only, or both. Ledgy then generates draft grant transactions for these dividend equivalents, which inherit the vesting behaviour of the original grants.
Before you start
Before using dividend equivalents, make sure:
Your company is an Enterprise or Public customer and has access to the Dividends workflow
The relevant equity plan has Dividend protected enabled
The plan already has grants issued to the stakeholders you want to include
You know the payout per share and the reinvestment price you want to use for the event
Note: Dividend equivalents apply at the plan level. When Dividend protected is enabled on a plan, grant holders under that plan become eligible for dividend equivalents when a dividend is declared.
Step 1: Enable dividend protection on the equity plan
Go to Ownership, filter by Type: Equity Plan and edit the plan you want to use.
In the Plan settings, enable Dividend protected under the Other options section.
Then choose the currently available option:
Forfeitable: dividend equivalents follow the same vesting conditions as the underlying grant. If the original grant is forfeited, the accrued dividend equivalents are forfeited as well.
Step 2: Create a new dividend event
Go to Equity Events > Dividends and click Add dividend event.
In the Dividend source section:
Select Grants as the source
Choose one or more plans in From plan
Optionally filter to specific stakeholders
Step 3: Choose the vesting scope
When using Grants as the source, Ledgy asks how the dividend should treat vesting. You can choose:
Vested: calculate dividend equivalents only on vested grant tranches as of the record date
Unvested: calculate dividend equivalents only on unvested grant tranches as of the record date
Vested and unvested: calculate dividend equivalents on the full grant balance, regardless of vesting status
This setting determines which portion of each parent grant is used to calculate the dividend equivalent.
Step 4: Configure the event
In Event configuration, fill in:
Event name
Record date
In Payout, fill in:
Payout per share: the dividend amount per eligible unit
Reinvestment price: the price Ledgy uses to convert dividend value into new grant units
Rounding rule: how Ledgy should round the resulting units
If your company is private, you can also set the payout currency. If it differs from the company currency, Ledgy asks for an exchange rate.
Step 5: Calculate and review the preview
Click Calculate to generate the preview.
Ledgy creates a grant-based preview using the selected plans, stakeholders, record date, vesting scope, payout per share, and reinvestment price.
In the preview, admins can review the generated dividend equivalent rows before creating transactions. Each row is tied back to a parent grant and shows the eligible units and the new units that will be created. Admins with edit permissions can also adjust the issued units or delete individual rows before creating the draft transactions.
Step 6: Create draft transactions
When you are ready, click Create transactions and then Create drafts.
Ledgy creates draft transactions for the dividend equivalents. These are additional grant transactions, not cash dividend payout transactions.
If document templates are attached, Ledgy can also create documents and draft signatures as part of the workflow.
How Ledgy handles vesting on the new grant units
The new grant units inherit vesting behaviour from the parent grant based on the vesting scope you selected:
If you selected Vested, the new units are treated as already vested
If you selected Unvested, only the remaining unvested portion carries over
If you selected Vested and unvested, Ledgy mirrors the full grant balance at the record date
In practice, this means the dividend equivalent grant stays aligned with the original grant rather than creating an unrelated vesting schedule.
Tips and important notes
Grant-based dividend events currently create Grants payouts, not cash payouts
The current plan-level dividend protection option is Forfeitable
Cash payouts for grant-based dividend events are marked as Coming soon in the current UI
If a parent grant has been deleted after the event was created, Ledgy will not create transactions for that event until the issue is resolved
Frequently asked questions
Do dividend equivalents pay cash to grant holders?
Do dividend equivalents pay cash to grant holders?
No. In this workflow, Ledgy converts the dividend value into additional grant units.
Do I need to enable this on every grant individually?
Do I need to enable this on every grant individually?
No. Dividend protection is configured at the equity plan level and applies to grants issued under that plan.
Can I choose which part of the grant is eligible?
Can I choose which part of the grant is eligible?
Yes. The Vesting scope setting lets you calculate on vested units, unvested units, or both.
What does the reinvestment price do?
What does the reinvestment price do?
It is the price Ledgy uses to convert the dividend value into the number of new grant units that should be created.
What happens after I create the event?
What happens after I create the event?
Ledgy creates draft additional grant transactions for the eligible stakeholders and grants.