Meaning
Transaction types involve the movement of ownership units that are still subject to time based or performance based restrictions. An unvested share transfer usually happens during a corporate reorganization or when a founder moves their holdings into a trust.
Restriction Persistence
Obligations to the company stay attached to the stock regardless of who holds the certificate. If the original recipient leaves the firm, the shares are still forfeited even if they were moved to a different account. This continuity prevents founders from bypassing vesting schedules through early transfers.
The cost is the legal fee required to document the assignment properly.
Ownership Continuity
Planning for estate or tax purposes often drives the need for this movement. A founder might transfer unvested units to a family vehicle while they are still at a low valuation. The new holder accepts the risk that the shares may never fully vest.
This strategy requires the consent of the board and the company. By moving the shares early, the founder locks in a cost basis that may be beneficial if the company eventually goes public or is sold. The transaction must be reported to the internal cap table manager to ensure the vesting triggers are still tracked.
Valuation Impact
Recording the transfer at the correct price is essential for future tax filings.
