Post Vest Holding Period Requirements

A topic which has attracted much attention recently is the use of Post-Vest Holding Period (PVHP) requirements in connection with equity-based incentive compensation such as Employee Stock Options (ESOs) or Restricted Stock Units (RSUs). Both operational and accounting advantages are claimed for the use of PVHPs. What is more, PVHPs are represented as a potential cost-saving measure which may be incorporated in an incentive compensation program.

A PVHP requirement is a provision written into a Stock Plan or Employment Agreement which requires the recipient of ESOs or RSUs to hold the stock for a minimum amount of time after either vesting of the units or exercise of the options. The net effect of such a provision is a “discount for lack of marketability” or DLOM on the vested instrument, which reduces the fair value.

Montgomery Investment Technology, Inc. has both the necessary expertise and experience to advise you on the consequences of a PVHP in your equity-based compensation program. We invite you to contact us to discuss your specific requirements.

Background Articles

Post-Vest Holding Periods

Discount for Lack of Marketability