This month the call option agreement has been updated to refresh and
modernise it and to align it with the drafting of the put option agreement
newly introduced to the share option agreements portfolio last month.
These two agreements form both sides of the option process where a
shareholder in a company can require another shareholder to either purchase
their shares (put) or sell their shares to them (call).
A call option is where an existing shareholder (the grantee) in a private
limited company is granted the option to purchase (or “call”) for the
shares of another shareholder (the grantor) for a specific price and within
a specific time period. If the option is exercised, the grantee purchases
the shares in accordance with the terms of the agreement.
Parties may wish to enter into a call option if for example the parties
agree that one party should be able to participate more fully in a possible
sale of the company or other reorganisation and so will have the option to
“call” for additional shares, with a requirement that if the option is
exercised, the grantor is obliged to sell the shares. A call option can
also be useful following a company’s incorporation if shareholdings are
unequal, to allow one party the option to “call” for additional shares
later. The parties may wish to add conditionality to the exercise of the
option, this can be included within the template if this is required.
The template also includes a notice of exercise attached as a schedule to
the agreement. This notice is the option exercise mechanism.
This template assumes that both parties are individuals; however, this may
be changed if one or both parties are corporate entities. The template also
assumes that the consideration for the purchase of the shares will be made
in cash and that the granting of the option itself will be made for nominal
The template does not consider the tax and stamp duty implications of the
option. HMRC’s website has relevant information and should be considered.
Exercising a call option will not of itself attract stamp duty. Stamp duty
is payable on stock transfer forms at 0.5% of the value of the
consideration for the transfer of the shares. The stock transfer form, as
the document that transfers the shares, is the document liable for stamp
The contents of this Newsletter are for reference purposes only and do not constitute
legal advice. Independent legal advice should be sought in relation to any specific