Restricted stock definition
/What is Restricted Stock?
A restricted share is stock that cannot be sold, due to a limitation associated with that specific share. For example, an agreement between the issuer of stock and an investor may stipulate that the investor cannot sell the shares for a period of three years. Or, shares that have not been registered with the Securities and Exchange Commission cannot be sold by the investor, unless a stock sale exemption (such as Regulation A or Rule 144) applies.
The Vesting of Restricted Stock
Restricted stock can refer to shares that have been awarded to an employee, but which cannot be sold until certain conditions have been met, such as continuing to work for the employer for several additional years. Thus, if the person leaves the company before fulfilling the associated terms and conditions of the stock award, then no stock will be granted. This approach keeps the objectives of the employee and the company aligned through the vesting period.