Dividend Equivalent Shares
Overview of this form
The Dividend Equivalent Shares form is a legal document used in corporate finance to outline how dividend equivalents are credited to key employees during the exercise period of stock options. It allows companies to provide equivalent shares as dividends based on the options granted, differentiating it from other financial forms focused solely on stock options or employee compensation. This form ensures clarity and compliance in handling dividend equivalents in a corporate setting.
Key parts of this document
- Details on how dividend equivalents are credited to key employees based on stock options.
- Definitions of terms such as "Fair Market Value" and "record date".
- Process for calculating the aggregate value of dividend equivalents.
- Provisions for additional dividend equivalents earned on credited shares.
- Conditions for payment to key employees upon the exercise of stock options.
When to use this form
This form is used when a company wants to outline the dividend equivalent arrangements for key employees exercising stock options. It is particularly useful when a corporation declares dividends on its outstanding stock and intends to credit additional shares to employees based on their options. Companies should use this form to ensure that all parties understand the terms and conditions regarding dividend equivalents, promoting transparency and compliance with corporate governance standards.
Who should use this form
- Corporations offering stock options to key employees.
- Corporate legal teams managing employee compensation packages.
- Human resources departments involved in employee benefits administration.
- Executives responsible for financial and stock option policies.
How to complete this form
- Identify the key employee and specify their relevant stock options.
- Determine the record dates for declared dividends and calculate the number of dividend equivalents earned.
- Enter the Fair Market Value of the stock as of the record date.
- Outline the conditions for payment of credited shares upon the exercise of stock options.
- Ensure all parties sign and date the document as required for legal validity.
Is notarization required?
This form usually doesn’t need to be notarized. However, local laws or specific transactions may require it. Our online notarization service, powered by Notarize, lets you complete it remotely through a secure video session, available 24/7.
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Make edits, fill in missing information, and update formatting in US Legal Forms—just like you would in MS Word.
Download a copy, print it, send it by email, or mail it via USPS—whatever works best for your next step.
Sign and collect signatures with our SignNow integration. Send to multiple recipients, set reminders, and more. Go Premium to unlock E-Sign.
If this form requires notarization, complete it online through a secure video call—no need to meet a notary in person or wait for an appointment.
We protect your documents and personal data by following strict security and privacy standards.
Common mistakes
- Failing to accurately define the Fair Market Value on the record date.
- Not clearly specifying which stock options are eligible for dividend equivalents.
- Omitting signatures from key parties involved in the agreement.
- Neglecting to update the form with any changes in corporate policy regarding dividends.
Benefits of using this form online
- Convenient access to the form for immediate download and use.
- Editable templates allow customization to fit specific corporate needs.
- Reliable source, ensuring the form is drafted in compliance with legal standards.
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FAQ
You typically receive the shares after the vesting date. Only then do you have voting and dividend rights. Companies can and sometimes do pay dividend equivlent payouts for unvested RSUs.Unlike stock options, RSUs always have some value to you, even when the stock price drops below the price on the grant date.
Shares outstanding include shares of unvested restricted stock.Shares of unvested restricted stock are excluded from our calculation of basic weighted average shares outstanding, but their dilutive impact is added back in the calculation of diluted weighted average shares outstanding.
RSUs are taxed as income to you when they vest. If you sell your shares immediately, there is no capital gain tax, and the only tax you owe is on the income. However, if the shares are held beyond the vesting date, any gain (or loss) is taxed as a capital gain (or loss).
With restricted stock and restricted stock units, upon job termination you almost always forfeit whatever stock has not vested. Exceptions can occur, depending on the vesting terms of your employment agreement or stock plan, such as special provisions for disability, retirement, or an acquisition.
IPO Lock-Up Period and Long Term Capital Gains In most scenarios when your RSUs vest you can sell them immediately and there is almost no tax impact.However, if the stock reverts to the original IPO/Vesting date price, don't hesitate to sell since there will be no additional tax benefit.
Dividend equivalents paid on restricted stock units are treated as compensation income and will be subject to federal income tax when paid to the employee.When dividend equivalents are paid on a current basis, they are subject to federal income tax at the time of the payment.
Dividend Equivalents means a right, granted to a Participant under the Plan, to receive cash, shares, other Awards or other property equal in value to dividends paid with respect to shares of Stock.
A dividend equivalent payment is any gross amount that references the payment of a dividend on a U.S. equity and that is used to compute any net amount transferred to or from the long party, even if the long party make a net payment to the short party or the net payment is zero.
RSUs do not offer voting rights until actual shares are issued at vesting. No Dividends. RSUs cannot pay dividends, because no actual shares are used (employers can pay cash dividend equivalents if they choose). No Section 83(b) Election.
