This gives you the right to buy company shares at a fixed price in the future—for example, the right to buy 1,000 shares at £5 each, even if they're worth £10 later. You profit if the share price rises. This is high-risk because: (1) the shares may never be worth more than the fixed price, so you gain nothing; (2) you often must stay employed for years before you can exercise (use) the options; (3) if you're fired or resign, you may lose them entirely; (4) tax rules are complex and you could owe tax even if you don't sell. Share schemes are common in startups but rarely make employees wealthy—they're often used to keep staff loyal cheaply.
Ask: when can you actually buy the shares (immediately or after 3 years)? What happens to your options if you're made redundant or resign? Is there a "good leaver" clause protecting you? Request a realistic estimate of what the shares might be worth—don't rely on optimistic projections. Understand the tax position: in the UK, some schemes (like EMI options) have tax benefits, but others don't. If the company is private, ask how you'd ever sell the shares to realize any profit. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This gives you the right to buy company shares at a fixed price in the future—for example, the right to buy 1,000 shares at £5 each, even if they're worth £10 later.
Why should I care about this clause?
You profit if the share price rises.
What are my options?
This is high-risk because: (1) the shares may never be worth more than the fixed price, so you gain nothing; (2) you often must stay employed for years before you can exercise (use) the options; (3) if you're fired or resign, you may lose them entirely; (4) tax rules are complex and you could owe tax even if you don't sell.
How does this affect small businesses?
Share schemes are common in startups but rarely make employees wealthy—they're often used to keep staff loyal cheaply.