What are ESOPs?
An Employee Stock Option Plan can grant an eligible employee the right to acquire shares at an exercise price after satisfying the plan’s vesting conditions. An option is not the same as an owned share until it has been validly exercised and allotted.
Terms you should understand
The offer of options under the company’s ESOP plan.
The time or conditions that must be completed before exercise.
The process of paying the exercise price to acquire eligible shares.
The ability to find a buyer, subject to transfer restrictions and availability.
Before considering a transfer
- Read the grant letter, ESOP plan and shareholders’ agreement.
- Check whether the company has a right of first refusal or other restrictions.
- Confirm that the exercised shares are available in demat form.
- Obtain independent tax and legal advice for your circumstances.
Tax treatment
Tax can arise at exercise and again on a later sale, depending on the applicable law and your individual facts. Rules and rates change, so this page should not be used as tax advice. Consult a qualified tax professional before exercising or transferring ESOP shares.
Important: ESOP and unlisted shares can be illiquid and can lose value. A private-market quote is indicative, can change without notice and is not a recommendation.