ISO vs NSO — when does each one apply?

ISOs are reserved for W-2 employees of the issuing entity (or a parent / subsidiary corporation per IRC §424), capped at $100k of strike-value vesting in any calendar year, and require both board and stockholder approval of the underlying plan within 12 months. They get long-term capital-gains treatment if held 2 years from grant + 1 year from exercise. NSOs have none of those constraints — non-employees, advisors, contractors, and board members all receive NSOs. Tax is ordinary income at exercise on the bargain element.

Why does the strike price have to be ≥ the 409A FMV?

IRC §409A treats stock options as deferred compensation. Granting at a strike below FMV creates a §409A violation: the optionee owes ordinary income on the bargain element at vest plus a 20% additional federal tax plus penalties. The §409A safe harbor — strike ≥ FMV from a valid valuation no older than 12 months — eliminates that risk. Matter blocks grants that would violate it with `422 strike_below_fmv`.

`POST /v1/entities/ /grants` issues one grant. `POST /v1/entities/ /grants/batch` issues up to 250 in one atomic call, de-duplicated on `(idempotency_key, batch_index)`, with `?dry_run=true` available to validate the wave first. Use the batch endpoint for hire waves, ledger imports, and board-approved annual refreshes; use the single-grant endpoint for everything else.

When does the share ledger move?

Option grants reserve shares against the plan's `available_shares` on grant, but the `ShareLedgerEntry` lands on **exercise**, not on grant. RSA grants land on grant (since the recipient is buying the shares directly). RSU grants land on **vest** (since vest is when shares are issued). The webhook is `share_ledger.entry_recorded` in all three cases — pay attention to the `trigger` field.

Does the grant need board approval?

Most companies have authority delegated to the CEO + plan administrator via a standing resolution at plan adoption. Each grant is then ratified (not approved) at the next board consent. If your bylaws require per-grant approval, generate the consent first via run-a-board-consent `kind: grant_approval` and pass the `authorizing_resolution_id` on the grant.

What happens if the recipient never signs?

The signing envelope auto-expires after 30 days. The grant transitions to `voided`, the share-pool reservation releases, and a fresh call with a new `Idempotency-Key` re-issues the offer. The candidate is renotified.

Can a tier-4 agent issue grants autonomously?

Yes — within scope. Standing autonomous policies typically allow individual grants up to a per-grant share count and an aggregate per-30-day window (see sign-as-tier-4). Hard floors: officer-level grants, grants over $250k of options-value, and any grant where the strike falls below FMV always escalate to a tier-3 human countersign — Matter rejects these from a tier-4 token with `422 hard_floor_violation`.

Grant employee equity

Last updated Jun 14, 2026

Approve an option grant via board consent, generate the grant notice + stock option agreement, schedule cliff and vesting, and notify the employee.

4 calls · 3 webhooks

Trigger

A new hire signed an offer letter that promises options. The board approved (or will approve) at the next consent.

Call sequence

1. Issue the grant (pending board)

POST /v1/grants  { entity, holder, shares, exercise_price, vesting }

2. Roll the grant into a board consent

POST /v1/board_consents  { entity, actions: [{ kind: 'approve_option_grant', grant }] }

3. Generate notice + agreement

POST /v1/documents  { template: 'tpl_grant_iso_v2', subject: grant }

4. Send to employee for signature

POST /v1/signing_envelopes  { document, signers: [employee] }

Idempotency

Grant creation is idempotent on `(entity, holder, shares, vesting.hash)`. Replays after board approval return the existing grant in `vested`-or-`vesting`.

Webhooks

Event	Description
`grant.created`	Grant in pending_board_approval.
`board_consent.signed`	Grant flips to vesting.
`grant.signed`	Employee signed.

Errors

Status	Code	Description
`422`	`insufficient_pool`	The pool has fewer remaining shares than requested.
`422`	`409a_stale`	The 409A is older than 12 months. Refresh first.

Refresh a 409ABring the strike-price valuation current.

Pre-flight

Grants only land on a live entity. draft and submitted entities can't issue grants — finish formation first via form-a-company.

equity_plan_id must reference an EquityPlan with available_shares >= quantity. New entity? Run adopt-an-equity-plan first — the formation-time stub plan is not ISO-eligible until adopted by board and stockholder consent under IRC §422.

valuation_id must reference a Valuation no older than 12 months for iso and nso grants. ISOs additionally require strike_price ≥ valuation.fair_market_value_per_share for safe harbor. Stale or superseded valuations return 409 valuation_stale — refresh first via refresh-a-409a.

The recipient must already exist as a Stakeholder on the entity. Add via POST /v1/entities/{id}/stakeholders — name, email, kind: natural_person, and (for ISOs) tax_residency: US plus an SSN/ITIN are required for the agreement to render.

Error recovery

Failure	Cause	Remediation
`409 plan_pool_exhausted`	`quantity` exceeds the plan's `available_shares`.	Top up the pool via adopt-an-equity-plan Pattern 2 or amend via `POST /v1/equity_plans/{id}/amendments`.
`409 valuation_stale`	ISO/NSO and the referenced `valuation_id` is older than 12 months or has been `superseded_by_event`.	Refresh via refresh-a-409a and retry with the new `valuation_id`.
`422 strike_below_fmv`	ISO strike is less than the valuation's `fair_market_value_per_share`.	Bump strike to ≥ FMV. ISOs cannot be granted below FMV without a §409A violation (20% additional tax + interest on the optionee).
`422 plan_unauthorized_for_iso`	Plan `type: option_pool` was adopted by board only — ISO eligibility requires stockholder approval per IRC §422.	Run an `option_plan_stockholder_approval` resolution; cross-link `authorizing_resolution_id` and retry with the same `Idempotency-Key`.
`412 stakeholder_missing_tax_id`	ISO grants need an SSN/ITIN on file for §83(b) and Form 3921 reporting.	`PATCH /v1/stakeholders/{id}` to add `tax_id`.
`408 envelope_expired`	Recipient didn't sign within 30 days.	Re-fire `POST /v1/entities/{id}/grants` with a new `Idempotency-Key`; original draft moves to `voided`.

Full taxonomy at errors.

Variations

Non-qualified options. Looser tax treatment, available to non-employees. No ISO §422 adoption ceiling — board-only resolution is enough.

{
  "stakeholder_id": "stk_advisor",
  "equity_plan_id": "plan_4Vt6yJzH",
  "kind": "nso",
  "quantity": 10000,
  "strike_price": {"amount": 42, "currency": "usd"},
  "valuation_id": "val_5DwYsKjM",
  "vesting_schedule": {"cliff_months": 0, "total_months": 24, "granularity": "monthly"},
  "grant_date": "2026-04-25"
}

Restricted stock units — no strike price, taxed on vest. Common at the post-Series-B stage when the FMV is high enough that option strikes are unaffordable for new hires.

{
  "stakeholder_id": "stk_7Hpx9WxY",
  "equity_plan_id": "plan_4Vt6yJzH",
  "kind": "rsu",
  "quantity": 5000,
  "vesting_schedule": {
    "cliff_months": 12,
    "total_months": 48,
    "granularity": "quarterly",
    "double_trigger_acceleration": true
  },
  "grant_date": "2026-04-25"
}

Restricted stock award — purchased at fair value on grant day, eligible for an §83(b) election within 30 days. Most common for very early hires when the strike price is still negligible. Set tax_election: "83b" and Matter prepares + tracks the election filing automatically.

{
  "stakeholder_id": "stk_FirstHire",
  "equity_plan_id": "plan_4Vt6yJzH",
  "kind": "rsa",
  "quantity": 100000,
  "strike_price": {"amount": 1, "currency": "usd"},
  "vesting_schedule": {"cliff_months": 12, "total_months": 48, "granularity": "monthly"},
  "grant_date": "2026-04-25",
  "tax_election": "83b"
}

Up to 250 grants in a single atomic call against POST /v1/entities/{id}/grants/batch. Either every grant is accepted, or none are; failures land on BatchResult.failures[] keyed by request index. Use a single Idempotency-Key for the whole batch and supply authorizing_resolution_id if a board has pre-approved the wave.

curl -X POST https://api.mattermode.com/v1/entities/ent_Nq3KcAbc/grants/batch \
  -H "Authorization: Bearer $MATTER_KEY" \
  -H "Matter-Version: 2026-05-01" \
  -H "Idempotency-Key: $(uuidgen)" \
  -H "Content-Type: application/json" \
  -d '{
    "authorizing_resolution_id": "res_QA42026Wave",
    "grants": [
      {"stakeholder_id": "stk_NewHire01", "equity_plan_id": "plan_4Vt6yJzH",
       "kind": "iso", "quantity": 25000,
       "strike_price": {"amount": 42, "currency": "usd"},
       "valuation_id": "val_5DwYsKjM",
       "vesting_schedule": {"cliff_months": 12, "total_months": 48, "granularity": "monthly"},
       "grant_date": "2026-04-25"},
      {"stakeholder_id": "stk_NewHire02", "equity_plan_id": "plan_4Vt6yJzH",
       "kind": "iso", "quantity": 30000,
       "strike_price": {"amount": 42, "currency": "usd"},
       "valuation_id": "val_5DwYsKjM",
       "vesting_schedule": {"cliff_months": 12, "total_months": 48, "granularity": "monthly"},
       "grant_date": "2026-04-25"}
    ]
  }'

Pre-flight the wave with ?dry_run=true to see the per-row validation without consuming pool shares — the response surfaces every failures[] entry as if you had called for real.

Advisor agreement vests differently — typically a 24-month linear schedule with no cliff, attached to a separate Advisor Agreement document. Use NSO (advisors aren't W-2 employees and can't receive ISOs).

{
  "stakeholder_id": "stk_AdvisorBoard",
  "equity_plan_id": "plan_4Vt6yJzH",
  "kind": "nso",
  "quantity": 8000,
  "strike_price": {"amount": 42, "currency": "usd"},
  "valuation_id": "val_5DwYsKjM",
  "vesting_schedule": {"cliff_months": 0, "total_months": 24, "granularity": "monthly"},
  "grant_date": "2026-04-25",
  "agreement_template": "faast_advisor"
}

The faast_advisor template uses Founder Institute's FAST agreement under the hood. Substitute metadata.linked_advisor_agreement with a Document ID if you maintain a custom advisor agreement.

FAQ

Adopt an equity plan — required precondition for issuing grants
Refresh a 409A — refresh the FMV reference before grants stale
Run a board consent — ratify grants with kind: grant_approval
Impose retroactive vesting — layer vesting onto an already-issued grant
Issue a priced round — the round close pattern that bundles grants + 409A refresh atomically
Grants endpoint — single-grant primitive reference
Grants batch endpoint — batch primitive reference

Last updated Jun 14, 2026

Approve an option grant via board consent, generate the grant notice + stock option agreement, schedule cliff and vesting, and notify the employee.

4 calls · 3 webhooks

Trigger

A new hire signed an offer letter that promises options. The board approved (or will approve) at the next consent.

Call sequence

1. Issue the grant (pending board)

POST /v1/grants  { entity, holder, shares, exercise_price, vesting }

2. Roll the grant into a board consent

POST /v1/board_consents  { entity, actions: [{ kind: 'approve_option_grant', grant }] }

3. Generate notice + agreement

POST /v1/documents  { template: 'tpl_grant_iso_v2', subject: grant }

4. Send to employee for signature

POST /v1/signing_envelopes  { document, signers: [employee] }

Idempotency

Grant creation is idempotent on `(entity, holder, shares, vesting.hash)`. Replays after board approval return the existing grant in `vested`-or-`vesting`.

Webhooks

Event	Description
`grant.created`	Grant in pending_board_approval.
`board_consent.signed`	Grant flips to vesting.
`grant.signed`	Employee signed.

Errors

Status	Code	Description
`422`	`insufficient_pool`	The pool has fewer remaining shares than requested.
`422`	`409a_stale`	The 409A is older than 12 months. Refresh first.

Refresh a 409ABring the strike-price valuation current.

Pre-flight

Grants only land on a live entity. draft and submitted entities can't issue grants — finish formation first via form-a-company.

Error recovery

Failure	Cause	Remediation
`409 plan_pool_exhausted`	`quantity` exceeds the plan's `available_shares`.	Top up the pool via adopt-an-equity-plan Pattern 2 or amend via `POST /v1/equity_plans/{id}/amendments`.
`409 valuation_stale`	ISO/NSO and the referenced `valuation_id` is older than 12 months or has been `superseded_by_event`.	Refresh via refresh-a-409a and retry with the new `valuation_id`.
`422 strike_below_fmv`	ISO strike is less than the valuation's `fair_market_value_per_share`.	Bump strike to ≥ FMV. ISOs cannot be granted below FMV without a §409A violation (20% additional tax + interest on the optionee).
`422 plan_unauthorized_for_iso`	Plan `type: option_pool` was adopted by board only — ISO eligibility requires stockholder approval per IRC §422.	Run an `option_plan_stockholder_approval` resolution; cross-link `authorizing_resolution_id` and retry with the same `Idempotency-Key`.
`412 stakeholder_missing_tax_id`	ISO grants need an SSN/ITIN on file for §83(b) and Form 3921 reporting.	`PATCH /v1/stakeholders/{id}` to add `tax_id`.
`408 envelope_expired`	Recipient didn't sign within 30 days.	Re-fire `POST /v1/entities/{id}/grants` with a new `Idempotency-Key`; original draft moves to `voided`.

Full taxonomy at errors.

Variations

Non-qualified options. Looser tax treatment, available to non-employees. No ISO §422 adoption ceiling — board-only resolution is enough.

{
  "stakeholder_id": "stk_advisor",
  "equity_plan_id": "plan_4Vt6yJzH",
  "kind": "nso",
  "quantity": 10000,
  "strike_price": {"amount": 42, "currency": "usd"},
  "valuation_id": "val_5DwYsKjM",
  "vesting_schedule": {"cliff_months": 0, "total_months": 24, "granularity": "monthly"},
  "grant_date": "2026-04-25"
}

Restricted stock units — no strike price, taxed on vest. Common at the post-Series-B stage when the FMV is high enough that option strikes are unaffordable for new hires.

{
  "stakeholder_id": "stk_7Hpx9WxY",
  "equity_plan_id": "plan_4Vt6yJzH",
  "kind": "rsu",
  "quantity": 5000,
  "vesting_schedule": {
    "cliff_months": 12,
    "total_months": 48,
    "granularity": "quarterly",
    "double_trigger_acceleration": true
  },
  "grant_date": "2026-04-25"
}

{
  "stakeholder_id": "stk_FirstHire",
  "equity_plan_id": "plan_4Vt6yJzH",
  "kind": "rsa",
  "quantity": 100000,
  "strike_price": {"amount": 1, "currency": "usd"},
  "vesting_schedule": {"cliff_months": 12, "total_months": 48, "granularity": "monthly"},
  "grant_date": "2026-04-25",
  "tax_election": "83b"
}

curl -X POST https://api.mattermode.com/v1/entities/ent_Nq3KcAbc/grants/batch \
  -H "Authorization: Bearer $MATTER_KEY" \
  -H "Matter-Version: 2026-05-01" \
  -H "Idempotency-Key: $(uuidgen)" \
  -H "Content-Type: application/json" \
  -d '{
    "authorizing_resolution_id": "res_QA42026Wave",
    "grants": [
      {"stakeholder_id": "stk_NewHire01", "equity_plan_id": "plan_4Vt6yJzH",
       "kind": "iso", "quantity": 25000,
       "strike_price": {"amount": 42, "currency": "usd"},
       "valuation_id": "val_5DwYsKjM",
       "vesting_schedule": {"cliff_months": 12, "total_months": 48, "granularity": "monthly"},
       "grant_date": "2026-04-25"},
      {"stakeholder_id": "stk_NewHire02", "equity_plan_id": "plan_4Vt6yJzH",
       "kind": "iso", "quantity": 30000,
       "strike_price": {"amount": 42, "currency": "usd"},
       "valuation_id": "val_5DwYsKjM",
       "vesting_schedule": {"cliff_months": 12, "total_months": 48, "granularity": "monthly"},
       "grant_date": "2026-04-25"}
    ]
  }'

Pre-flight the wave with ?dry_run=true to see the per-row validation without consuming pool shares — the response surfaces every failures[] entry as if you had called for real.

{
  "stakeholder_id": "stk_AdvisorBoard",
  "equity_plan_id": "plan_4Vt6yJzH",
  "kind": "nso",
  "quantity": 8000,
  "strike_price": {"amount": 42, "currency": "usd"},
  "valuation_id": "val_5DwYsKjM",
  "vesting_schedule": {"cliff_months": 0, "total_months": 24, "granularity": "monthly"},
  "grant_date": "2026-04-25",
  "agreement_template": "faast_advisor"
}

The faast_advisor template uses Founder Institute's FAST agreement under the hood. Substitute metadata.linked_advisor_agreement with a Document ID if you maintain a custom advisor agreement.

FAQ

Adopt an equity plan — required precondition for issuing grants
Refresh a 409A — refresh the FMV reference before grants stale
Run a board consent — ratify grants with kind: grant_approval
Impose retroactive vesting — layer vesting onto an already-issued grant
Issue a priced round — the round close pattern that bundles grants + 409A refresh atomically
Grants endpoint — single-grant primitive reference
Grants batch endpoint — batch primitive reference

Grant employee equity

Trigger

Call sequence

1. Issue the grant (pending board)

2. Roll the grant into a board consent

3. Generate notice + agreement

4. Send to employee for signature

Idempotency

Webhooks

Errors

Pre-flight

Error recovery

Variations

FAQ

On this page

Grant employee equity

Trigger

Call sequence

1. Issue the grant (pending board)

2. Roll the grant into a board consent

3. Generate notice + agreement

4. Send to employee for signature

Idempotency

Webhooks

Errors

Pre-flight

Error recovery

Variations

FAQ

On this page

Grant employee equity

Trigger

Call sequence

1. Issue the grant (pending board)

2. Roll the grant into a board consent

3. Generate notice + agreement

4. Send to employee for signature

Idempotency

Webhooks

Errors

Related

ISO vs NSO — when does each one apply?

Why does the strike price have to be ≥ the 409A FMV?

What's the difference between this and `/grants/batch`?

When does the share ledger move?

Does the grant need board approval?

What happens if the recipient never signs?

Can a tier-4 agent issue grants autonomously?

On this page

Grant employee equity

Trigger

Call sequence

1. Issue the grant (pending board)

2. Roll the grant into a board consent

3. Generate notice + agreement

4. Send to employee for signature

Idempotency

Webhooks

Errors

Related

ISO vs NSO — when does each one apply?

Why does the strike price have to be ≥ the 409A FMV?

What's the difference between this and `/grants/batch`?

When does the share ledger move?

Does the grant need board approval?

What happens if the recipient never signs?

Can a tier-4 agent issue grants autonomously?

On this page