Option to buy or sell shares templates

An option is a legal right that one party (or both parties) can exercise in the future, subject to the satisfaction of any specified conditions.  If the option holder decides to exercise the option, the transaction related to the option will then be completed.  In the case of an option over shares, the sale and purchase of the shares will then occur.

A share option can refer to several different arrangements:

• an option to buy or sell shares between a buyer and a seller
• an option granted by a company, often to an employee, allowing them to acquire shares in the company as an incentive and reward for performance (an “employee share option”)

An option can be structured as:

• a call option – the buyer has the right to call for the sale of the shares
• a put option – the seller has the right to require the buyer to purchase the shares
• a put and call option – both buyer and seller have the right to require the sale and purchase of the shares

This section includes template documents for options for the purchase or sale of shares.

A call option gives the buyer the right to require the sale of shares to them. They can “call” for the shares during the option period and on the agreed terms.

A put option gives the seller the right to require the buyer to purchase their shares. They can “put” the shares to the buyer during the option period and on the agreed terms.
An agreement can include just one of these, or both, depending on what the parties negotiate.

Yes — if a share option is properly documented and the legal requirements are met, it creates a binding contractual right. The option holder can enforce that right if the conditions for exercise are satisfied.

Yes. Share options are sometimes used as part of a buyout structure. For example, a buyer might take an initial stake with a call option to acquire the remaining shares later, or a seller might have a put option to require the buyer to purchase their remaining shares on agreed terms.

Usually, no. Most share option agreements specify an “option period” — a defined window when the option can be exercised. Exercising outside that period would normally only be possible if the agreement allows early exercise, for example, on certain trigger events.

Not unless the agreement allows it. Most share option agreements restrict transfer to keep control over who can become a shareholder. If assignment or transfer is allowed, the agreement will set out the conditions that must be met.