Vesting (Swedish: intjänande) is the period of time or the conditions that must be met before a person gains full rights to allocated shares or options. A common model is linear vesting over several years, often with an initial period before anything vests, known as a cliff. There is also milestone-based vesting.
Vesting is used in incentive programs and in shareholders' agreements between founders. The terms determine when participants can exercise their employee stock options or keep their shares if they leave the company.
Linear vesting is a vesting model where equal portions vest at regular intervals over a set period.
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Milestone-based vesting means rights are earned when the company or the individual reaches set goals.
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An incentive program gives employees or key people remuneration linked to how the company develops.
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An employee stock option gives an employee the right to buy shares in the company in the future.
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