Stock option plans — ESOP
We draft the option plan and the grant papers your team will actually sign: the pool, the vesting, the leaver rules and what happens to options when the company is sold.
When you need a stock option plan
You promised equity in a chat
A message saying «you will get one percent» creates an expectation and no instrument. When the person leaves or the company is sold, both sides read it differently.
A key hire asks for options
Senior candidates ask for the plan document at the offer stage. Having nothing to show turns a compensation discussion into a negotiation about trust.
An investor asked for the cap table
Undocumented promises surface in diligence as a contingent claim on the shares. The round then waits for paperwork that should have existed earlier.
Someone is leaving with options
The plan decides what lapses, what a leaver may exercise and how long they have. Without a plan an argument decides it.
A sale or a round is coming
An exit needs to know what accelerates, what converts and who signs. Fixing that during the deal costs concessions elsewhere.
What you get
- A plan document and its rules
- Grant letters ready to sign
- A vesting and leaver schedule
- Corporate approvals in order
- An option register template
What is required for an option plan
An option plan that hands out real shares sits on three layers. A corporate decision creates the shares or the pool; a plan document sets the rules for everyone; a grant goes to each person separately.
A company reporting under IFRS recognises the cost of the plan in its accounts under the share-based payment standard, where an investor reads it.
A plan has three routes, and taste does not decide between them: the form of the company, where the shares actually sit and whether the law sets a procedure for employee shares do. The first two routes end in shares; the third ends in cash calculated as if the person held them.
Where the plan touches how the company is run and who signs what, it meets governance and executive employment.
Decisions from the company
- The decision that creates the shares or the pool — at the level and in the form the law of the country of registration and the articles require.
- A board decision that adopts the plan and — where that is required — puts it to the shareholders, minuted so the sequence can be shown later.
- Who must be kept out — by law, by the articles or by investor terms — and how that is checked before a grant is signed.
- Authority to sign the grants, given to a named person so grants do not wait for a full board each time.
Numbers the plan fixes
- Pool size, fixed by a resolution so grants stop being ad hoc, and how dilution is shared between founders and investors.
- The exercise price, the date it is measured on and the valuation behind it.
- The vesting schedule, the cliff and whether vesting runs by time, by milestone, or by both at once.
- The exercise window after leaving: that is the deadline the two sides later read differently.
People and their categories
- Who is eligible: employees, contractors, advisers, and whether group companies count.
- Good leaver and bad leaver definitions that can be applied without a hearing.
- What happens on death, illness, resignation, dismissal and the end of a term.
- How the plan interacts with the employment contract, so the two do not contradict.
Exit and what survives it
- Acceleration: full, partial, single trigger or double trigger, stated in words and never implied.
- Treatment on a share sale, an asset sale and a reorganisation, which behave differently.
- Drag and tag arrangements once option holders become shareholders.
- Who signs on behalf of option holders in a deal, and under which power.
Papers behind each grant
- A grant letter with the number, the price, the dates and the conditions.
- An acceptance the person signs and you keep, plus the register you maintain from the template we give you.
- A plain summary, because an instrument nobody understands retains nobody.
- Where the assets are intellectual property, the chain from creator agreements has to hold as well.
Three routes for a plan
The statutory scheme
The company issues real shares to employees where the law of the country of registration sets a procedure for that. The person ends up holding shares, but the sequence of approvals is fixed in advance.
A contractual option plan
The right to acquire shares on agreed terms rests on the plan document and the grant. It needs no statutory procedure, and that is what makes it available to a private company.
A phantom plan
The person is paid in cash on an exit, calculated as if they held the shares. Nobody joins the share register, which suits a group where the shares sit away from where the people work.
Sources: the cost of an option plan is recognised in the accounts under IFRS 2 Share-based Payment of the IFRS Foundation, which applies to companies reporting under IFRS. What the company has to decide to issue the shares, and who approves the scheme, is set by the law of the country of registration.
Stages of work
Reading what already exists — 3–5 working days.
We will collect the promises already made: offer letters, chats, board minutes, any earlier plan. The output is a list of commitments and the gap to the documents.
That list is worth having on its own: an investor will reconstruct it in diligence anyway.
Design of the plan — 1 week.
Pool, vesting, cliff, leaver treatment, exit behaviour and who is eligible, decided as a set. Each choice is priced in dilution and in what it does to retention.
They interact: a long cliff with a short post-termination window looks generous and returns almost nothing.
Choosing the route.
We will go through the three routes with you. Each has a price in time and in approvals, and each leaves the option holder something different.
Where the law of the country of registration sets a procedure for employee shares, we will read it first.
Drafting — 1–2 weeks.
The plan document, the grant letter, the acceptance, the register template, and the board resolutions and — where that is required — the shareholder resolutions that authorise all of it.
Where earlier promises exist, the drafting says how they are honoured.
Corporate approvals.
We will sequence the resolutions so the pool exists before the first grant is signed, and so any category the law or the articles bar from taking part stays outside the scheme.
Rollout to the team.
Grant letters issued, acceptances collected, and the register opened by you from the template. We will write the plain summary the team is given.
Maintenance — ongoing.
New grants, leavers and changes of terms. You keep the register; we will update the template and the papers as the terms change, so the next round of diligence adds up.
Our other corporate work — from share transfers to reorganisations — sits in the Corporate & Structuring area.
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