Understanding equity plan capacity

Equity plan capacity determines how many shares or options your company can grant at any given time. Before you issue options or restricted stock, you need to understand how much room your equity plan has and what happens when that room runs out.

This article is a prerequisite for Grant options to an employee and Issue shares. Complete your equity plan configuration in Configure your company settings before issuing equity.

Pulley tracks your equity plan capacity through four metrics. You can view these at any time by going to Cap Table → Equity Plans and selecting a plan.

Available to Grant = Plan Size minus Equity Outstanding

For example, if your plan authorizes 100,000 shares and you've granted 98,908, you have 1,092 shares available. This is the number Pulley checks when you initiate a new grant.

Plan capacity is separate from your company's authorized share count. Your authorized shares must be sufficient to cover both your issued shares and the full equity plan reserve. These are two distinct limits. Running out of plan capacity does not mean you've run out of authorized shares, and vice versa.

When a proposed grant exceeds your available capacity, Pulley displays a warning. The system does not automatically block issuance. Companies are sometimes in the middle of approving a plan increase or backfilling historical grants, and a hard block would prevent legitimate workflows.

However, issuing grants beyond your authorized plan size carries real legal and compliance risk. Before proceeding past a capacity warning, confirm with your legal counsel and board that a formal plan amendment has been approved. Recording a grant in Pulley before that approval is in place does not make it legally valid.

Shares don’t always leave the pool permanently. Several events automatically return capacity to your Available to Grant count.

When an option grant is cancelled for any reason, the shares return to available capacity automatically.

When a stakeholder is terminated:

The treatment depends on the security type:

If you need more capacity than your current plan allows, you'll need to amend the plan. The legal work happens outside Pulley first, then you record the amendment in Pulley.

Increasing your equity plan size typically requires:

Work with your legal counsel to complete this before making any changes in Pulley.

For a full walkthrough of creating or editing an equity plan, see Create an equity plan and Edit an equity plan.

Companies often maintain more than one equity plan simultaneously. Common scenarios include:

Each plan tracks its own capacity independently. When issuing a grant, you select which plan to issue from. Pulley does not automatically route grants across plans. To view all plans and their current capacity, go to Cap Table → Equity Plans.

A pour-over allows you to terminate an old equity plan and transfer its remaining available capacity into a new plan. This is typically done when a company adopts a new omnibus plan and wants to consolidate rather than administer two active plans.

To execute a pour-over in Pulley, terminate the old equity plan and select which plan you would like to reallocate shares to during the process.

Why do my equity plan numbers differ from cap table exports?

The equity plan page shows Equity Outstanding, while cap table exports show Plan Size and Shares Available as separate columns. Equity Outstanding equals Plan Size minus Shares Available. The underlying numbers are the same; the labeling differs between views.

Can I issue equity from multiple plans simultaneously?

Yes. When issuing a grant you select the specific plan to issue from. Pulley tracks each plan's capacity separately, so you can issue from whichever plan has available capacity.

What happens to shares when I repurchase them?

It depends on the security type. Unvested RSA shares return to the equity plan pool. Common shares from exercised options become treasury stock and do not return to the equity plan. They return to your authorized share count instead.

What's the difference between plan capacity and authorized shares?

These are two separate limits. Plan capacity is the number of shares your board has set aside specifically for equity grants. Authorized shares is the total number of shares your company is permitted to issue under its certificate of incorporation. Both limits must be sufficient to support your grants. Exhausting one does not affect the other.

What's the difference between ordinary and preferred authorization?

Common stock and preferred stock are authorized separately under your certificate of incorporation. Equity plan grants typically draw from your authorized common stock. If you see an over-authorization warning, it usually means your authorized common share count needs to be increased alongside the equity plan amendment. Work with your legal counsel to address both together.