Every option grant needs board approval — before, not after

Here’s the uncomfortable mechanic: the equity your offer letter promised does not exist until the board says so. Under 8 Del. C. §157(b), option grants are authorized by the board of directors — the offer letter is a promise to ask the board, not the grant itself. Most startups get the promising part done beautifully and the asking part… eventually. The gap between the two is one of the most common findings in early-stage diligence, and unlike most items on this calendar, there’s no cure window — the obligation is due the moment the grant is made, because until the board acts, nothing was granted at all.

What actually happens in the gap

An engineer signs an offer letter in March: 25,000 options, four-year vest. The board consent gets drafted… and buried. In September, a seed round closes and the 409A doubles. Now the board approves the March promise — but the grant date is September, and §409A prices the options at September’s fair market value. The engineer’s strike just doubled through no fault of their own. The alternatives are all bad: eat the higher strike (angry employee), paper it at the old price (a below-FMV grant with §409A penalties on the employee), or invent creative dating (don’t — that one has a name, and backdating scandals ended careers).

The gap isn’t a paperwork delay. It’s a pricing decision made by accident.

What a clean grant looks like

One board consent, before or at the promise, containing: the recipient, the share count, the strike at current fair market value (resting on a live 409A), the vesting schedule, and the equity plan it draws from. Batch approvals are normal — a quarterly consent covering every new hire is fine practice. What matters is sequence: board first, or board simultaneously; never board someday.

Why diligence cares so much

Unapproved grants are the classic unwind. An acquirer’s or lead investor’s counsel reconciles the cap table against board consents grant by grant — it’s mechanical, and gaps glow. Every mismatch becomes remediation: ratifications, repricings, occasionally re-negotiated offers with employees who thought this was settled years ago. Deals have repriced over option hygiene; more often the cost is two weeks of cleanup at the exact moment the company has no spare two weeks. The fix at grant time is a one-page consent. The fix at diligence time is a project.

How the room tracks it

Standing cross-references every option and RSU agreement in your room against the board consents that cover them — the same resolution-matching that backs the rest of your cap table. A grant with no covering consent surfaces immediately as an open obligation (“board approval for this equity grant”), and clears the moment the matching consent lands. The engine doesn’t invent a grace period, because Delaware doesn’t have one.