What does it mean when a stock is restricted?
Restricted stock refers to unregistered shares of ownership in a corporation that are issued to corporate affiliates, such as executives and directors. Restricted stock is non-transferable and must be traded in compliance with special Securities and Exchange Commission (SEC) regulations.
What is the difference between restricted and unrestricted stock?
Restricted and unrestricted stocks are important components of corporate executive compensation packages. Restricted stocks have particular conditions that must be fulfilled before they can be transferred or sold, whereas unrestricted stocks have no such conditions. There are two types of restricted stocks.
What is the difference between restricted stock and common stock?
Restricted stock is given by a corporation, while common stock can be bought and sold at any time. Under Internal Revenue Service guidelines, Special Tax 83(b) election may be made. This makes the recipient of the stock liable for income-tax consequences immediately but establishes a cost basis.
What is the difference between PSU and RSU?
PSUs are simply RSUs with a slightly different vesting trigger. Instead of the simple passage of time associated with RSUs – stay with the company until the vesting date – PSUs depend on staying with the company until some goal or event is achieved.
What is restricted stock?
Updated Jun 16, 2019. Restricted stock refers to unregistered shares of ownership in a corporation that are issued to corporate affiliates, such as executives and directors.
When is restricted stock transferrable?
Restricted stock is often used as a form of employee compensation, in which case, it typically becomes transferrable upon the satisfaction of certain conditions, such as continued employment for a period of time or the achievement of particular product-development milestones, earnings per share (EPS) goals, or other financial targets.
Why are insiders given restricted stock?
Insiders are given restricted stock after merger and acquisition activity, underwriting activity, and affiliate ownership in order to prevent premature selling that might adversely affect the company.
Should you give restricted stock to your employees?
Many firms are now using restricted stock as a reward for employees. The advantages to restricted stock are: employees get dividends, employees usually get voting rights, and employee gets something even if the stock price drops over the vesting period (whereas an option would be worthless).