RSUs
Restricted Stock Units (RSUs) in Europe
Restricted stock units, or RSUs, are a promise to deliver shares once vesting conditions are met, with no exercise step and no strike price. They are common at later stage and public companies but carry specific risks at private startups.
RSU guides for European startups
RSU Plan
An RSU is a promise from the company to give an employee actual shares once vesting conditions are satisfied, with no purchase price to pay. Unlike options, RSUs have value even if the share price falls, as long as it stays above zero.
Vesting
RSU vesting is usually time-based, but many private companies add a second condition, a liquidity event, before shares are actually delivered. This double trigger structure protects both the company and the employee from unwanted tax and liquidity problems.
Taxation
RSUs are typically taxed as ordinary income when the shares are delivered, based on the share value at that point, rather than when they are later sold. This creates a real dry income risk at private companies where shares cannot easily be sold to cover the tax.
RSUs for Startups
Options remain the default for early stage European startups because of tax-advantaged regimes and lower cost at low valuations. RSUs tend to make more sense once a company is larger, better funded, or approaching an IPO.
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