New Template

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 stamp duty.