You would typically utilize the 'Lapse' function if any employee were to leave the company and you need to cancel a portion of (or all) their granted options. See here for more information on 'What Happens if an Employee Leaves the Company'.
There are 2 methods that can be used to lapse options within the platform. Regardless of which method you choose, any options marked as lapsed in Cake are automatically returned to the unallocated pool of options. Users need to have at least Edit access to the company account to be able to lapse options.
You can lapse the options in the following ways. It is often dependent on your Plan and the vesting conditions for the offer.
Full Offer: Use this method to cancel all granted options for the respective offer including both vested and unvested options.
Time based: With this method, you specify the date at which vesting will cease. Typically, this corresponds with the employment termination date. At this point, the platform will calculate the number of options vested as at the date specified, which the employee will retain and only those options unvested are cancelled and returned to the unallocated pool.
Accelerate vesting: Using the time-based lapsing method, you can also choose to 'accelerate' the vesting. For example, on the date of termination, you may wish to vest a portion of the options that was originally due to vest at a future date.
Milestone based: This method allows you to cancel options that are tied to particular milestone achievements if they are not achieved. You can also use this in scenarios where you may want to partially vest a milestone.
Method 1:
Click 'Incentive plans' and then 'Options/Stock Options' from the left main menu.
Click 'View pool' on the relevant option pool.
Search for the relevant option holder within your 'Offers' list, whose options you would like to lapse (cancel & return to the unallocated pool).
On each offer, there will be different icons for each available action. Select the Lapse vesting icon (look for the square inside the circle!).
Choose from the prompts to Lapse options as: Full offer, Time based or Milestone based depending on how you wish to handle the options. Refer to the guidance above on Full offer vs. Time based vs. Milestone based. You should also check your Equity Incentive Plan (or, Plan Rules) for how to handle options for employees who leave.
Enter the Lapse date, ie. the date you wish to cancel the options. When using the Time based method to lapse options, the system will calculate how many options were vested as at the date specified and only cancel (lapse) the unvested options. You can also 'accelerate' the vesting if you wish for an additional portion of their unvested options to vest on the Lapse date.
Finalise by clicking Lapse.
Method 2:
Click 'Equity' from the main menu and then 'Options holders'.
Click 'More' in the top right corner.
Select 'Lapse options' from the dropdown menu.
Search for the relevant Option holder, Option pool and grant (where they may have multiple grants).
Choose from the prompts to Lapse options as: Full offer, Time based or Milestone based depending on how you wish to handle the options. Refer to the guidance above on Full offer vs. Time based vs. Milestone based. You should also check your Equity Incentive Plan (or, Plan Rules) for how to handle options for employees who leave.
Enter the Lapse date, ie. the date you wish to cancel the options. When using the Time based method to lapse options, the system will calculate how many options were vested as at the date specified and only cancel (lapse) the unvested options. You can also 'accelerate' the vesting if you wish for an additional portion of their unvested options to vest on the Lapse date.
Finalise by clicking Lapse.