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With Upstock’s double-trigger RSUs, if you leave your company before satisfying the cliff period or first trigger, your equity will not vest at all.

However, if you satisfy the cliff period or first trigger, and then leave the company afterwards, your equity remains with you in an unvested state until the second trigger takes place (i.e., the landmark event).

So you can better understand how that works, let’s have a quick example.

We have two workers, Alice and Brian who both joined the company in 2020 and were awarded a 5-year fixed, double-trigger RSU plan for 5,000 shares with a 3-year cliff period.

Under the RSU plan, once the cliff period is reached, it will initially vest 3000 RSUs to both Alice and Brian. The remaining 2000 RSUs will then vest at a rate of 1,000 per year until all the 5,000 

RSUs are initially vested on the 5th year anniversary of the RSU plan.

So far, so good. But let’s say that Brian left the company in 2021 while Alice left the company in 2024. Both workers obviously were not able to stay for 5 years, which would have allowed them to have all 5,000 RSUs initially vested. 

However, Alice’s RSU plan in the scenario above would still initially vest with 4,000 RSUs as she was able to meet her cliff period (3,000 shares) and stayed for an additional year thereafter (additional 1,000 shares). Of course, she will not be able to get the remaining 1,000 RSUs since she does not stay until 2025 or the fifth and final year of her RSU plan.

Brian, on the other hand, will receive nothing as he left the company just a year after joining and was unable to meet the 3-year cliff period which was the first trigger of the company’s double-trigger RSU plan.

This means that when the landmark event takes place—say, an IPO in 2027—only Alice will have all her initially vested RSUs become fully vested and payable to her. This is so even if Alice may no longer be connected with the company and possibly working for a different one at that point in time.

A possible exception to this is when a worker is terminated by the company “for cause.” This refers to a situation when a worker is terminated for a legally justifiable reason such as gross negligence or fraud. Hence, even if the said worker meets the cliff period or first trigger under the plan, the RSUs may not vest and instead be deemed forfeited because the termination was legally justified.

Lastly, note that the same scenarios above apply with Upstock’s dynamic equity plans. But one key difference is that, due to the nature of a dynamic equity pool, a worker who meets the cliff period but leaves earlier than others, may have his share in the pool diluted as the other participants in the pool will have more time to earn more equity points and get a larger share in the pool.

Disclaimer: This material has been prepared for informational or education purposes only. The discussions or information contained herein may be based on sources reasonably believed to be reliable but which has not been independently verified by an independent tax or legal professional. Thus, it is not intended to provide, and should not be relied upon as tax, investment, business and/or legal advice. Please consult with your own tax or investment adviser and legal counsel regarding this subject matter especially with respect to the relevance or accuracy of any discussion or information contained in this material under the applicable laws, rules and regulations in your jurisdiction.

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