What an incentive plan is
An incentive plan is how Sociedad Ejemplo, S.A. shares with its team part of the value it creates: it grants you units that become yours over time and that turn into money when the company opens a liquidity window.
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The key point. You are granted some units. They are not yours all at once: they vest according to a schedule. Vested units are already yours, but they only turn into money if the company opens a window to sell.
What it is for#
A growing company wants the people who make it grow to gain when it gains. Instead of giving shares to each employee, it creates a plan: it reserves a number of units and grants them to the people it chooses. Each of those people is called a beneficiary.
A unit tracks the value of one share in the company. If Sociedad Ejemplo, S.A. is worth twice as much in a few years, so are your units.
The two types of plan#
In Sttok each plan has only one type, and the type appears in the "Plan Type" column of "Incentive Plans".
| Type | What you receive | What happens when you sell |
|---|---|---|
| Phantoms (phantom shares) | An economic right. You are not a shareholder: you are paid what the share would be worth. | You are paid in money, without anyone giving you shares. |
| Stock Options | An option to buy real shares at a price set in advance. | You pay that price and keep the difference from the value of the share. |
That price set in advance is called the exercise price. Some phantom plans have one too: it is deducted from the value of each unit when it is sold. That is why a unit only makes you money if it is worth more than its exercise price.
How they become yours: vesting#
Vesting means earning your units over time. Each plan sets three things when it is created, in its fields "Cliff", "Vesting: Vesting period" and "Vesting speed":
- Cliff, or waiting period: the first months during which nothing vests yet. If you leave before it ends, you normally take nothing with you.
- Vesting: how many months it takes for everything to vest, counting from the grant date.
- Speed: how often a new tranche vests, for example every day or every month.
2024 Plan · Phantoms
12-month cliff · 48-month vesting · monthly
An example. Pablo is granted 4,800 units with a 12-month cliff and 48-month monthly vesting. During the first year nothing vests. When the year is up, everything accumulated vests at once: 1,200 units. From then on he adds 100 a month, until he has all 4,800 after four years.
Vested units are yours. The rest depend on you staying with the company: what happens to them if you leave is set out in your plan's conditions.
When it turns into money#
Because the shares of Sociedad Ejemplo, S.A. are not listed on a stock exchange, you cannot sell your units whenever you want. You can only do so when the company opens a liquidity window, also called a buyback offer: a few weeks during which it buys part of the vested units at a set price. In Sttok this is done in "Incentive market", with a purchase offer. We explain it here.
That is why the value you see for your units is an estimate: it depends on what the company is worth and it is not money until you sell.
Where you see it in Sttok#
If you manage the plan
In the Incentive Plans menu you have the pool "Summary", the "Plans list" and the "Beneficiaries list". The plans list shows, for each one, its name, type, status, start date, price per unit, vesting, usage and granted units out of the total. From each beneficiary you see their plans, their schedule and their documents.
If you are a beneficiary
You see your profile: your plans, how many units have vested, your schedule and your documents. If the company gives you access, in "Incentive market" you see the offers to sell. With "Calculate incentive value" you can estimate what they are worth.
Frequently asked questions#
Does having units make me a shareholder?
With phantoms, no: it is a right to be paid, not a share. With stock options, you become a shareholder only if you exercise the option and buy the shares.
Why isn't the value in my profile what I am going to receive?
Because it is an estimate using whatever company valuation is in use at the time. When you actually sell, the offer price applies, the exercise price is deducted if there is one, and the applicable tax withholding is made.
Can I be in more than one plan?
Yes. Each plan you are in is a separate grant, with its own units, its grant date and its schedule.
Related
- What a liquidity window is A liquidity window, or buyback offer, is the period during which someone, often the company itself, buys part of the vested units of an incentive plan at a set price. In Sttok it is a purchase offer in "Incentive market", and in a company that is not listed it is the way to turn those units into money.
- The invitation letter The invitation letter is the document in which the company offers you units of an incentive plan: it states how many, from which plan, on what conditions and with what schedule. When you accept and sign it, the grant becomes final.
- The pool and the resolutions that change it The pool is the total number of units the company has reserved for its incentive plans. It is approved by the general meeting, grows or shrinks with new resolutions, and is split into units granted to beneficiaries and units available to grant.
- Grant units to a beneficiary Granting means giving a person a number of units of a plan, with "Add Beneficiary" in "Incentive Plans", which opens the "Add Beneficiary to the incentive plan" dialog: the beneficiary, the plan, the grant date, the units and the invitation date. The grant inherits the plan's conditions, unless you change them for that person, and Sttok can send them the invitation letter to sign.