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A Share Appreciation Rights Plan (also known as a Stock Appreciation Rights Plan) is a compensation incentive which awards employees with cash or stock if the company performs well. A Share Appreciation Rights Plan is similar to an Employee Stock Option Plan except that the employee is not required to pay the options’ exercise price.
What is in a Share Appreciation Rights Plan?
Date of Grant. The date of the grant is the day in which the share appreciation right is given to you.
Exercise Price. Similar to an ESOP, the exercise price determines if you will make money in the stock. However, the cash payout is only the difference between the current price and the exercise price. There is no need for you to purchase the stock in a Share Appreciation Plan
Vesting Schedule. The vesting schedule specifies when the shares can be exercised or if any performance criteria need to be met.
When Should You Use a Share Appreciation Rights Plan?
Share Appreciation Rights are similar to Employee Stock Options Plans (ESOP) with the difference that the exercise results in cash. You should be aware of the various advantages and disadvantages vs an ESOP with regard to investment allocation and tax and choose accordingly.
Conclusion
A Share Appreciation Rights Plan is a great way to incentivize employees. A Zegal template will guide you through the creation process with minimal effort and maximum protection.
You Might Also Like
Along with this document, make sure you see these other templates in our library:
- Shareholder Agreement
- Option Agreement
- Employee Option Repurchase Agreement
- Share Appreciation Rights Plan
- Share Option Plan
The Zegal Template Library
Zegal’s template library represents a complete and curated list of essential and premium business templates that can be used directly, for everyday business needs. Importantly, whether you’re a startup or a larger enterprise, you will find that our Zegal automation solution allows anyone to create a legal agreement, any time, anywhere. All without a need for an expensive lawyer. Why do we do this? Well, we think that running your business day-to-day is important, and having these templates at your fingertips allows you to not miss a beat!
Lawyers draft and curate all of our legal templates for ease of understanding using plain English. Just fill out our guided questionnaires, and we will create the contract for you. Using our patent-pending expert rules engine, we automate the creation of complex legal contracts.
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This article does not constitute legal advice.
The opinions expressed in the column above represent the author’s own.
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Zegal was founded in 2014 by lawyer friends Daniel Walker and Jake Fisch. Having been a part of the system that preserves quality legal advice only for those that can afford it, the two were determined to build a model that delivers the ‘corporate law firm’ experience to small business.
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