Glossary | Cake Equity

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An independent assessment of the fair market value of a private company which assists in determining how much it costs to buy or issue stock in your company.

A

Advisory Shares

Advisory shares (or advisor shares) are a form of non-cash equity compensation given to startup advisors in exchange for their time and expertise, strategic insights, experience, and network.

C

Cap (capitalization) table

A place where a company records all equity based transactions including ownership stakes, types of shares and option pools

CLawback

A non-negotiable provision whereby money already paid to an employee must be recalled back to an employer or benefactor, often due to certain circumstances or events.

Cofounder agreement

A legally binding contract that all co-founders of a business agree to that outlines the rights, responsibilities, liabilities and obligations of each founder.

Convertible note

A means of raising capital through an agreement between the company and the investor to loan money to the company, in return for shares on the happening of some certain event. If the certain event does not occur, the loan is paid back by the company through interest.

E

EMI

Enterprise Management Incentive scheme.

ESOP

Employee share option plan.

ESOw

Employee stock ownership plan.

Exercise

Process of converting a Vested Option into an ordinary stock. An Option can be Exercised when the Option has Vested, and the Exercise Price is paid.

Exercise PERIOD

Period in which an employee can Exercise Options. Often, an employee won’t Exercise Options straight after Vesting, and will wait to Exercise them later on (for example, at an exit).

Exercise price

Amount to be paid by the employee to Exercise the Option. In many countries, an approved valuation is required to determine this price. This is often also referred to as a Strike Price.

Exit event

When the owners of a company “exit” the business by selling the business, for example by Initial Public Offering (listing) or acquisition by a third party.

G

GRANT DATE

A place where a company records all equity based transactions including ownership stakes, types of shares and option pools

L

Lapse

A place where a company records all equity based transactions including ownership stakes, types of shares and option pools

O

OFFER

A place where a company records all equity based transactions including ownership stakes, types of shares and option pools

OFFER LETter

The agreement setting out the number of Options being allocated, the Vesting conditions, and relevant Exercise and Options Price. In some jurisdictions this is referred to as an Award Agreement or an Option Agreement.

OPTION

OPTION price

The price the employee pays to be Granted the Options. In most jurisdictions, this is usually set at $0. Start Date means the date the Vesting Period starts ticking. This can be the Start Date of employment, or another date.

OPTION Holder

Any employee or contractor who has been offered (and accepted such offer) options to purchase stocks under an ESOP.

S

SCHEME

A place where a company records all equity based transactions including ownership stakes, types of shares and option pools

START DATE

The date the Vesting Period starts ticking. This can be the Start Date of employment, or another date.

STRIKE PRICE

The same meaning as Exercise Price.

V

VESTING

The process by which the Option holder earns full rights to their Options, to allow them to be converted to stocks. This can happen by way of meeting certain time-based Vesting conditions, or other performance based milestones. Only Vested Options can be Exercised to become stocks.

VESTING PERIOD

The time from the Start Date, to the date the last Options will Vest under the Vesting conditions.