ContractsCounsel Logo

Restricted Stock Agreement Review

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 7,549 reviews
Home Blog Restricted Stock Agreement Review

Jump to Section

Need help with a legal contract?

Post Project Now

A restricted stock agreement is a contract between a company and an employee that grants an employee shares of company stock. However, the shares are called “restricted stock” because they are subject to certain limitations like a vesting period.

A restricted stock agreement will outline these restrictions and inform employees about their rights to the stock including how the restrictions are satisfied and when the stocks are fully owned and can be traded or sold.

What is a Restricted Stock Agreement Review?

A restricted stock agreement review is the process of examining the terms and conditions outlined in the contract. The purpose of the review is to ensure that the agreement accurately reflects the agreed upon terms, is fair, and protects the interests of all parties.

While it is possible to review your own agreement, it is recommended that you hire a lawyer familiar with restricted stock agreements to conduct the review for you. These agreements can be complicated and a professional will know how to assess important factors like:

  • Vesting schedule
  • Performance-based conditions
  • Tax implications
  • Impact of mergers or acquisitions
  • Compliance with securities regulations

A comprehensive review will identify ambiguities, potential risks, and any discrepancies within the agreement. Your lawyer can then provide recommendations for necessary adjustments to protect the your rights under the agreement.

What Should I Look for in a Restricted Stock Agreement?

When reviewing a restricted stock agreement, look for the following key elements:

  • Vesting schedule A timeline of when restrictions on the shares will be lifted. Two common vesting schedules are time based and performance based.
  • Performance conditions The specific criteria that need to be met for the shares to vest if the vesting schedule is performance based.
  • Acceleration clause A provision for accelerated vesting in the event of a change in control, merger, acquisition, or other specified circumstances.
  • Forfeiture conditions Circumstances under which you might forfeit unvested shares like leaving the company before vesting is complete.
  • Rights and privileges Any rights and privileges that come with ownership of restricted stock like voting rights, dividend distributions, and access to company information.
  • Transfer restrictions Restrictions on transferring or selling the shares before they become fully vested.
  • Termination of employment What happens to your shares if you leave the company, or your employment is terminated.
  • Change in control The impact of a change in control, merger, acquisition, or other major events affecting the company.
  • Delivery of shares The process for receiving your vested shares, including any required paperwork or documentation.

A thorough understanding of these elements is essential for you to make an informed decision about entering into a restricted stock agreement. If any terms are unclear or raise concerns, don't hesitate to seek clarification or professional advice.

Meet some lawyers on our platform

Melissa L.

4 projects on CC
View Profile

Brian R.

1 project on CC
View Profile

Ryenne S.

436 projects on CC
View Profile

Gregory B.

138 projects on CC
View Profile

Are Restricted Stock Units Worth It?

Restricted stock units, sometimes abbreviated to “RSUs” can be worth it, but it depends on your financial goals, the company's performance, and your overall compensation package.

RSUs offer potential benefits like equity ownership, potential for stock price appreciation, and alignment with company success. However, they also come with risks like market fluctuations and potential tax implications.

When determining if restricted stock units are worth it, consider factors like vesting schedule, company stability, future growth prospects, and your ability to diversify your investments.

What are the Disadvantages of Restricted Stock Units?

Restricted stock units offer employees many benefits, but they also come with some disadvantages that you should be aware of before agreeing to have RSUs as part of your compensation package.

  1. 1. Tax implications Once a restricted stock unit vests, it is considered taxable income, which can increase your tax liability for the year. This tax is due regardless of whether you sell the shares immediately or hold onto them.
  2. 2. Deferred cash compensation Restricted stock units do not provide immediate cash flow and you can't access the value of RSUs until they vest.
  3. 3. Market volatility The value of your restricted stock unit is tied to the company's stock price, which can fluctuate. If the stock price drops significantly after the RSUs are granted, the value of your RSUs can decrease.
  4. 4. Loss of value If you leave the company before the restricted stock unit vests, you might forfeit unvested units and lose potential future value.
  5. 5. Lack of liquidity Until restricted stock units vest and are settled, you can't sell the shares to access cash. This could limit your ability to meet immediate financial needs.
  6. 6. Tied to employment Restricted stock units are often structured as a retention tool to encourage employees to stay with the company until the units vest. This could limit your freedom to explore other career opportunities.
  7. 7. Complexity The intricacies of restricted stock unit taxation, vesting schedules, and settlement processes can be complex and may require the assistance of financial and tax professionals.

Before accepting restricted stock units as part of your compensation package and entering into a restricted stock unit agreement, you should consult with a lawyer who is knowledgeable about stocks.

How Long Does It Take for RSUs to be Released?

The timeline for restricted stock units to be released or vested varies depending on the vesting schedule set by the company. Common vesting schedules include a cliff period of one year, after which RSUs may vest incrementally over the next three years. This means it can take anywhere from one to four years for RSUs to fully vest.

It is important to remember that vesting schedules can be customized and negotiated. Before entering into a restricted stock agreement, employees should review the company’s proposed vesting schedule to determine if it is fair and reasonable.

Should I Hire a Lawyer to Review my Restricted Stock Agreement?

Yes. It is always encouraged to hire a lawyer to review any contract that may have a significant impact on your financial future. Restricted stock agreements can be very complex and come with certain implications and possible disadvantages.

Your attorney will help you evaluate your financial situation, goals, and risk tolerance and provide legal guidance on how restricted stock units fit into your overall investment portfolio, your tax strategy, and your long-term financial plans.

An attorney will review the restricted stock agreement on your behalf to ensure that the contract meets your needs and protects your interests. If necessary, your attorney can advocate for you in negotiations with your company to achieve more favorable terms.

Additional benefits of hiring a lawyer to review your restricted stock agreement include:

  • Legal expertise and guidance in the areas of employment law, securities, and contracts so you can understand the legal language and implications of the agreement.
  • Assurance that your rights are protected and the terms of the agreement are fair and compliant with all applicable laws.
  • An advocate to negotiate more favorable terms and propose amendments.
  • Advice for future planning and how to best integrate the restricted stock units into your broader financial plan.
  • Peace of mind knowing that you're making informed decisions about a significant part of your compensation.

Get Help with Hiring an Attorney

Do you need help with a restricted stock agreement? If so, post a project in ContractsCounsel's marketplace to receive bids from lawyers who are licensed to practice law in your state and can handle your project. All lawyers on the ContractsCounsel's platform are vetted by our team to make sure you are provided with top-tier service.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

Stacey D. on ContractsCounsel
View Stacey
5.0 (32)
Member Since:
July 16, 2020

Stacey D.

Free Consultation
Grand Rapids, MI
13 Yrs Experience
Licensed in FL, MI
Stetson University College of Law

I enjoy helping businesses of all sizes succeed, from start-ups to existing small and medium sized businesses. I regularly advise corporate clients on a variety of legal issues including formation, day to day governance, reviewing and drafting business contracts and other agreements, business acquisitions and sales, as well as commercial and residential real estate issues, including sales, purchases and leases. As an attorney licensed in both Michigan and Florida, I also advise clients on real estate issues affecting businesses and individuals owning real property in either state, whether commercial, residential or vacation/investment property. I also regularly assist nonprofit organizations in obtaining and maintaining tax exempt status, and provide general legal counsel on all matters affecting public charities, private foundations and other nonprofit organizations.

Samuel R. on ContractsCounsel
View Samuel
5.0 (29)
Member Since:
October 2, 2021

Samuel R.

Free Consultation
Phoenix - Arizona
4 Yrs Experience
Licensed in AZ, PA, UT
Widener University Delaware Law School

My career interests are to practice Transactional Corporate Law, including Business Start Up, and Mergers and Acquisitions, as well as Real Estate Law, Estate Planning Law, Tax, and Intellectual Property Law. I am currently licensed in Arizona, Pennsylvania and Utah, after having moved to Phoenix from Philadelphia in September 2019. I am currently General Counsel for a bioengineering company. I handle everything from their Mergers & Acquisitions, Private Placement Memorandums, and Corporate Structures to Intellectual Property Assignments, to Employment Law and Beach of Contract settlements. Responsibilities include writing and executing agreements, drafting court pleadings, court appearances, mergers and acquisitions, transactional documents, managing outside expert legal counsel, legal research and anticipating unique legal issues that could impact the Company. Conducted an acquisition of an entire line of intellectual property from a competitor. In regards to other clients, I am primarily focused on transactional law for clients in a variety of industries including, but not limited to, real estate investment, property management, and e-commerce. Work is primarily centered around entity formation and corporate structure, corporate governance agreements, PPMs, opportunity zone tax incentives, employee retention credits, and all kinds of business to business agreements. I have also recently gained experience with Estate Planning law, drafting numerous Estate Planning documents for people such as Wills, Powers of Attorney, Healthcare Directives, and Trusts. I am looking to further gain legal experience in these fields of law as well as expand my legal experience assisting business start ups, mergers and acquisitions and also trademark registration and licensing.

Jane C. on ContractsCounsel
View Jane
4.9 (72)
Member Since:
October 9, 2020

Jane C.

Free Consultation
New York
18 Yrs Experience
Licensed in CT, DC, NY
Pace University School of Law

Skilled in the details of complex corporate transactions, I have 15 years experience working with entrepreneurs and businesses to plan and grow for the future. Clients trust me because of the practical guided advice I provide. No deal is too small or complex for me to handle.

David M. on ContractsCounsel
View David
Member Since:
June 20, 2023

David M.

Free Consultation
Ann Arbor, Michigan
21 Yrs Experience
Licensed in MI
Wayne State University

Michigan and USPTO licensed attorney with over 20 years of experience on counseling clients in the fields of intellectual property, transactional law, technology involvement, negotiations, and business litigation.

Derek C. on ContractsCounsel
View Derek
Member Since:
June 19, 2023

Derek C.

Real Estate Attorney
Free Consultation
9 Yrs Experience
Licensed in FL
Barry University

Attorney with over 10+ years' experience and have closed over $1 Billion in real estate, telecommunications, & business transactions

John B. on ContractsCounsel
View John
Member Since:
June 21, 2023

John B.

Principal Attorney
Free Consultation
Indianapolis, IN
13 Yrs Experience
Licensed in IL, IN
University of Illinois Chicago School of Law

I am an attorney with over 13 years experience licensed in both Illinois and Indiana. I spent the early part of my career as a civil litigation attorney. Eventually, I moved into an in-house role, specifically as general counsel, to help companies avoid the pains of litigation. In doing so, I gained significant experience in executive leadership, corporate governance, risk management and cybersecurity/privacy. I bring this wealth of experience to my client engagements to not only resolve the immediate issue, but help implement lasting improvements in practices to avoid similar problems going forward.

Daniel W. on ContractsCounsel
View Daniel
Member Since:
June 22, 2023

Daniel W.

Free Consultation
New York
22 Yrs Experience
Licensed in NJ, NY

I am a Spanish-fluent corporate and commercial real estate attorney and broker licensed in New York and New Jersey. My pragmatic approach towards conflict resolution allows me to provide valuable advice to clients on avoiding issues of liability through effective risk management and strategic allocation of resources. I counsel businesses, developers, owners and investors on residential/commercial real estate and corporate transactions involving the acquisition, finance, development, leasing and disposition of all asset classes. In addition, I advise on joint venture partnerships and the negotiation, structure and drafting of operating agreements. Throughout my successful practice, I have held in-house counsel positions at large corporations, including JPMorgan Chase and Duane Reade, and had the privilege of working for the Department of Justice where I honed expertise in all aspects of mortgage-backed securities.

Find the best lawyer for your project

Browse Lawyers Now
Learn About Contracts
See More Contracts
other helpful articles

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer


Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city