This month a put option agreement has been added to the share option agreement templates. A put option is where an existing shareholder (the option
holder) in a private limited company is granted the option to sell his/her
shares for a specific price and within a specific time period. If the
option is exercised, the grantor of the option is required to purchase the shares in
accordance with the terms of the agreement.
Parties may wish to enter into a put option if one party wishes to be
protected against a possible sale of shares in the company or other share
reorganisation and so will have the option to “put” their shares on the
other party, with a requirement that if the
option is exercised, the grantor is obliged to purchase the shares.
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
consideration. No conditions are attached to the exercise of the option;
these can be added if relevant.
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 put 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 actually transfers the shares, is the document liable for
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