Pre-Ipo Equity Investment Counsel in Manhattan Guides Equity Plans

Corporate law and governing documents determine approval authority. For a Delaware corporation, DGCL §§ 152 and 157 address stock and option issuance and specified delegation. A corporate governance review can connect those rules to the plan and board record.

• Plan: Confirm adoption and current terms.
• Reserve: Reconcile available shares with outstanding awards.
• Approval: Match each grant to valid corporate action.

Private-company awards can raise federal securities issues even when issued as compensation. Rule 701 may exempt qualifying compensatory offers and sales by eligible non-reporting companies.

• Recipients: Confirm that grants fit the available exemption.
• Volume: Track Rule 701 sales over each 12-month period.
• Disclosure: Check added requirements before crossing the $10 million threshold.

Options, restricted stock, and RSUs work differently. An executive compensation review can align each award with its vesting, exercise, payment, and termination terms.

• Grant: State the type, amount, date, and applicable price.
• Vesting: Define time, performance, or other conditions.
• Exit: State what happens when employment ends.

Equity-based compensation does not always qualify as wages under state labor law. Courts have distinguished awards tied to future company value from compensation directly tied to individual performance. The plan, award, vesting status, and employment terms still matter.

• Status: Identify vested and unvested rights.
• Terms: Compare forfeiture language across documents.
• Repurchase: Check any company purchase or transfer right.

Section 83(b) is a federal tax election, not a state-law election. For eligible property transferred in connection with services, the election generally must be filed no later than 30 days after transfer.

• Award: Determine whether a property transfer supports an election.
• Deadline: Flag the 30-day period when applicable.
• Record: Keep grant and related tax records organized.

The cap table should tell the same story as signed awards and approvals. A small discrepancy is easier to address before formal investor diligence review begins.

• Issued: Match outstanding awards to approved grants.
• Changes: Record exercises, cancellations, forfeitures, and amendments.
• Pool: Recalculate available shares after material changes.

An option-pool increase can change founder and employee ownership. A venture capital financing review can compare the proposed pool with the capitalization assumptions used in the transaction.

• Fully Diluted: Confirm which securities enter the calculation.
• Reserve: Identify the pool increase requested for the round.
• Impact: Model effects on existing holders and new investors.

A missing signature or inconsistent grant date is easier to investigate before the closing calendar tightens. The cap table alone does not prove that every award was properly authorized.

• Approvals: Locate actions supporting outstanding grants.
• Agreements: Confirm signed award documents are available.
• Exceptions: Identify side promises outside standard forms.

Do not review a secondary sale from the cap table alone. Rights may appear in several agreements, and their interaction can determine which notices, consents, or transfer steps apply.

• Holder: Confirm the security the seller owns.
• Rights: Review transfer, ROFR, and co-sale provisions.
• Consent: Identify required approvals or notices.

The closing file should show current ownership and continuing rights. A capital markets and securities review can also address the securities record as the company approaches a public-market transaction.