Structuring Capitalization Tables and Restricted Stock Purchase Agreements for Enforceability
A capitalization table requires valid board resolutions and executed stock purchase agreements to legally enforce share ownership and repurchase rights.
continuous service definition
Meaning
Equity vesting provisions establish the unbroken period of active employment or advisory work required for equity rights to accrue. A continuous service definition specifies what counts as uninterrupted participation, detailing how leaves of absence, role transitions, and corporate reorganizations affect vesting schedules. The provision protects the enterprise from continuing to issue shares to individuals who no longer contribute to company operations.
It defines the formal standard for maintaining status as an eligible service provider.
Vesting Maintenance
Tracking service continuity requires matching human resource records with stock option plan terms across long operational horizons. A continuous service definition usually dictates that changing status from full-time employee to part-time consultant does not interrupt service unless the contract explicitly declares a termination event. If an individual takes an unapproved leave or ceases providing measurable services, vesting pauses or terminates according to the governing agreement.
Clear documentation prevents disputes over whether consulting hours or informal advisory calls maintain vesting rights after formal employment ends.
Service Interruption
Termination of active employment marks the definitive end of service regardless of severance pay periods or extended communication. Unapproved absences split the service record and cause immediate forfeiture of unvested options.
Contractual Boundary
Continuous service rules govern vesting eligibility but do not guarantee ongoing employment or mandate future contract renewals. A continuous service definition stops applying once all underlying equity instruments fully vest or cancel.