Can company owners use lay offs to prevent restricted stock from vesting before an acquisition?
Depending on your local laws, such a layoff may be an unlawful act. If the whole purpose of the lay-off is to strip the employees of their RSU's, the employer may be liable and get sued. However, you have to check that with a lawyer licensed in your jurisdiction. In many places there are no laws against this. In any case, you may claim that there was no good faith/just cause in the action and still sue the employer. Mere threat of a lawsuit may thwart the whole deal, so I suggest the employees to lawyer up and talk to the employer. That, by the way, will require to create a union - a representative body for the employees. In some places that by itself may be a just cause for termination (in some extremely anti-union jurisdictions, I would guess if there were some they would be in the US). Bottom line - talk to a lawyer. As littleadv says it depends on the local laws.   Normally one shouldn't be too worried. Typically the stocks given to the employees are a very small portion of the overall stocks ... the owners would not try to jeopardize the deal just so that they make an incrementally small amount of money ... they would rather play safe than get into such a practice.
Having stock options means that you have worked for and rightfully earned a part of the company's capital appreciation. Takeover of the company would indicate someone is interested in the company (something should be valuable). It would be unwise to not strike before the period lapses since the strike price is always lower than market price and takeovers generally increases stock values ... it is capital gains all the way my friend. Good luck. *observations not in professional capacity. pls consult a professional for investment related advice. "This is a great question.  I've participated in a deal like that as an employee, and I also know of friends and family who have been involved during a buyout.  In short:  The updated part of your question is correct: There is no single typical treatment.  What happens to unvested restricted stock units (RSUs), unvested employee stock options, etc. varies from case to case. Furthermore, what exactly will happen in your case ought to have been described in the grant documentation which you (hopefully) received when you were issued restricted stock in the first place. Anyway, here are the two cases I've seen happen before: Immediate vesting of all units.  Immediate vesting is often the case with RSUs or options that are granted to executives or key employees.  The grant documentation usually details the cases that will have immediate vesting.  One of the cases is usually a Change in/of Control (CIC or COC) provision, triggered in a buyout.  Other immediate vesting cases may be when the key employee is terminated without cause, or dies.  The terms vary, and are often negotiated by shrewd key employees. Conversion of the units to a new schedule.  If anything is more ""typical"" of regular employee-level grants, I think this one would be.  Generally, such RSU or option grants will be converted, at the deal price, to a new schedule with identical dates and vesting percentages, but a new number of units and dollar amount or strike price, usually so the end result would have been the same as before the deal. I'm also curious if anybody else has been through a buyout, or knows anybody who has been through a buyout, and how they were treated." "I think you need to realize that regardless of whether they are ""shady"" or not, owners/founders are by and large in it for themselves. You as an employee as just a resource - why should they divulge their finances to you? You won't offend them if you pry and ask for it, but they simply are not going to give you the straight up. They will give you a bare minimum or some song and dance that beats around the bush without actually telling you what you need to know. In regards to whether you should buy the restricted shares: why not? Startups are a gamble anyway. So simply decide how much you're willing to gamble, and spend that much buying some shares. I mean, you're already taking the gamble by accepting a lower salary in exchange for equity which, in all likelihood, will never be worth anything anyway." "Private companies often ""make the market"" for their own stock. So they may offer to buy back so many shares a year, give staff the option to sell stock back after so many years, etc.  But private companies can have their own restrictions. They can, for instance, forbid secondary trading or explicitly limit voting stock to family members.  Ostensibly, someone could sell a big chunk of a company for whatever price they wanted (unless it was prohibited).  For tax purposes, IRS will come after you if you get a bunch of value for less than you paid for.  It is not an unheard of way to transfer wealth, but a dollar? Probably just gift it. But I'm not a tax attorney...   But is absolutely not the same kind of price transparency, or price movement, that you see in public stock, you are correct. Larger private companies may have secondary markets that are still less transparent." "The fact that your shares are of a Canadian-listed corporation (as indicated in your comment reply) and that you are located in the United States (as indicated in your bio) is highly relevant to answering the question. The restriction for needing to be a ""qualified institutional buyer"" (QIB) arises from the parent company not having registered the spin-off company rights [options] or shares (yet?) for sale in the United States. Shares sold in the U.S. must either be registered with the SEC or qualify for some exemption. See SEC Fast Answers - Securities Act Rule 144. Quoting: Selling restricted or control securities in the marketplace can be a   complicated process. This is because the sales are so close to the   interests of the issuing company that the law might require them to be   registered. Under Section 5 of the Securities Act of 1933, all offers   and sales of securities must be registered with the SEC or qualify for   some exemption from the registration requirements. [...] There are regulations to follow and costs involved in such registration. Perhaps the rights [options] themselves won't ever be registered (as they have a very limited lifetime), while the listed shares might be? You could contact investor relations at the parent company for more detail. (If I guessed the company correctly, there's detail in this press release. Search the text for ""United States"".)" No, but insider information would have tipped them off on the timings of when to time some of their actions... possibly planning shorting it ahead, all kinds of who-diggery that those financial wizards can do to make shit tons of money off stocks / companies losing money. If the contributions were yours, they are vested immediately. Otherwise, there are some rules laid out on the Department of Labor website: ww.dol.gov/ebsa/publications/wyskapr.htm "they are entirely free to do whatever they want with the shares. In particular, they can sell them to whomever they choose No. Restrictions on who can sell when and to whom are a common thing with startups. ""Publicly traded"" companies are regulated in a much stricter way than private companies, so until the IPO the sales are limited to the OTC markets. But even that can be restricted by bylaws - for example ownership can only be limited to a group of investors approved by the board. As an employee - your grant was approved by the board, but when you come to sell, the buyer was not and the company may not agree to vet them. Bottom line is that it is not illegal to impose all kinds of restrictions on what the employees can do with their shares, as long as the shares are not listed on a public stock exchange (even after the company goes IPO with one class, other classes may remain restricted)." The company could use registered shares with restricted transferability, i.e. shares that require the consent of the issuing company for a change of ownership. I have had this happen a couple of times because of splits or sales of portions of the company.  The general timeline was to announce how the split was to be handled; then the split; then a freeze in purchasing stock in the other company; then a freeze in sales; followed by a short blackout period; then the final transfers to funds/options/cash based on a mapping announced at the start of the process. You need to answer two questions: To determine if the final transactions will make the market move you have to understand how many shares are involved compared to the typical daily volume. There are two caveats: professional investors will be aware of the transaction date and can either ignore the employee transactions or try and take advantage of them; There may also be a mirroring set of transactions if the people left in the old company were awarded shares in your company as part of the sale. If you are happy with the default mapping then you can do nothing, and let the transaction happen based on the announced timeline. It is easy, and you don't have to worry about deadlines. If you don't like the default mapping then you need to know when the blackout period starts, so you don't end up not being able to perform the steps you want when you want.  Timing is up to you. If the market doesn't like the acquisition/split it make make sense to make the move now, or wait until the last possible day depending on which part they don't like. Only you can answer that question. So to translate that to US English: taking an early retirement in lieu of impending layoffs.  If you have a layoff you're saying you have no need for the work and if you replace the workers then they come back to sue you (which seems to be what you're saying, and we have the same concept) but an early retirement is a voluntary exit with a compensation package such that any right to sue is forfeit because it was a consensual exit rather than mandatory.  Got it.  Thanks. :) Alot of these answers have focused on the dilution aspect, but from a purely legal aspect, there are usually corporate bylaws that spell out what kind of vote and percentage of votes is needed to take this type of action.  If all other holders of stock voted to do this, so 90% for, and you didn't, so 10% against, it's still legal if that vote meets the threshold for taking the action. As an example of this, I known of a startup where employees got $0/share for their vested shares when the company was sold because the voting stock holders agreed to it.  Effectively the purchase amount was just enough to cover debts and preferred stock. underwriters aren't subject to lock-up.  They actually don't hold anything.  They oversell at IPO, with their short position covered by the green shoe (an option from the company).  If the deal does well, the underwriters exercise the green shoe to cover their short.  If the deal runs into some pressure, they step in to support the price by buying back shares... thereby covering their short.  So they are doing price support in the early days of a deal, but it is almost always paid for by the company granting them an option.  But the underwriters aren't taking stock.  Correct that typically all insiders and existing investors are expected to sign-up a lock-up. I don't know the legal framework for RSUs, so I'm not sure what is mandatory and what is chosen by the company issuing them. I recently reviewed one companies offering and it basically looked like a flat purchase of stock on the VEST date. So even if I got a zillion shares for $1 GRANTED to me, if it was 100 shares that vested at $100 on the 1st, then I would owe tax on the market value on the day of vest. Further, the company would withhold 25% of the VEST for federal taxes and 10% for state taxes, if I lived in a state with income tax. The withholding rate was flat, regardless of what my actual tax rate was. Capital gains on the change from the market value on the VEST date was calculated as short-term or long-term based on the time since the VEST date. So if my 100 shares went up to $120, I would pay the $20 difference as short term or long term based on how long I had owned them since the VEST. That said, I don't know if this is universal. Your HR folks should be able to help answer at least some of these questions, though I know their favorite response when they don't know is that you should consult a tax professional. Good luck. Yes, there is a delay between when you buy a stock and when you actually take ownership of it.  This is called the settlement period. The settlement period for US equities is T+2 (other markets have different settlement periods), meaning you don't actually become a shareholder of record until 2 business days after you buy.  Conversely, you don't stop being a shareholder of record until 2 business days after you sell. Presumably at some point in the (far) future all public markets will move to same-day changes of ownership, at which point companies will stop making announcements of the form all shareholders of record as of September 22nd and will switch to announcements of the form all shareholders of record as of September 22nd at 13:00 UTC