Partially Canceling Option Grants


What’s new

Legal administrators in Carta can now partially cancel an option grant in Carta. Partially canceling an option grant will reduce the number of outstanding shares and return the shares back to the option pool.

How it works

You'll find the partial cancellation tool by navigating Securities > Equity awards and clicking on the ledger dropdown for the specific option you'd like to partially cancel:

First, you'll be asked to provide an effective date for the partial cancellation. A partial cancellation is an amendment to the option grant, and the effective date will determine when the amendment takes effect in the company's as-of date reporting.

Next, select the cancellation method, which determines how the partial cancellation will affect the vesting schedule for the option grant. Because a partial cancellation reduces the outstanding quantity of the option, Carta needs to know from which tranches the shares should be canceled.

Last in, first out cancellation method

For some situations, the issuer or their legal counsel may not specify the way in which the amendment will affect the vesting schedule. Issuers can select the last in, first out cancellation for the vesting schedule, and Carta will cancel shares starting from the future-most tranche and move up the vesting schedule until the specified quantity has been canceled.

Custom cancellation method

For situations in which the issuer or their legal counsel want to affect the vesting schedule in a specific manner with a partial cancellation, issuers can select the "Custom" share allocation method - this approach provides flexibility and allows the issuer to cancel shares from any tranche. The in-app spreadsheet allows legal administrators to first reflect the partial cancellation in a spreadsheet application outside of Carta and then copy/paste the resulting vesting tranches back into Carta.

After selecting "Review and confirm" at the bottom of the page, verify the cancellation quantity and other information to save the partial cancellation.

Additional Resources

For more information around the limitations and best practices for the partial cancellation tool, please refer to this support article.

Who this affects

The new partial cancellation tool is available to the legal administrators in all of Carta's private market customers.

Timing

Available now.