Board Approval of Stock Options is a legal process by which a corporation's board of directors is given the authority to approve the granting of stock options to employees. Stock options give employees the right to purchase a certain number of shares of the company's stock at a pre-determined price over a certain period of time. There are two types of Board Approval of Stock Options: private and public. Private Board Approval of Stock Options is when a privately held company's board of directors approves the granting of stock options. Public Board Approval of Stock Options is when a publicly traded company's board of directors approves the granting of stock options. Both types of Board Approval of Stock Options involve the board of directors reviewing the terms of the stock option grant, approving the grant, and signing off on the grant.
Board Approval of Stock Options
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FAQ
Granting an option requires the formal approval of your company's Board of Directors, either at a formal Board meeting or by a written consent signed by all of the members of the Board.
A stock option plan must be adopted by the company's directors and, in some cases, approved by the company's shareholders.
Incentive stock options can only be issued to employees of a company. Contractors, consultants, and board members are not eligible for ISOs, but are eligible for non-qualified stock options and other types of employee stock purchase plans.
Qualified stock options, also known as incentive stock options, can only be granted to employees. Non-qualified stock options can be granted to employees, directors, contractors and others. This gives you greater flexibility to recognize the contributions of non-employees.
Granting an option requires the formal approval of your company's Board of Directors, either at a formal Board meeting or by a written consent signed by all of the members of the Board.
If shareholder approval is needed, then the grant date is considered to be delayed until that approval has been obtained, unless shareholder approval is considered to be perfunctory. The same consideration applies when approval by the board of directors or a member of management is required.
Incentive stock options, or ISOs, are a type of equity compensation granted only to employees, who can then purchase a set quantity of company shares at a certain price, while receiving favorable tax treatment. ISOs are often awarded as part of an employee's hiring or promotion package.
Only employees can receive ISOs, whereas NSOs may be granted to any service providers (e.g., employees, directors, consultants, and advisors).