Stock Options
Employee Stock Options in Europe
Stock options give employees the right to buy shares later at a price fixed today. Rules on tax, exercise windows and leaver treatment differ sharply across the UK, France, Germany and the Netherlands.
Stock option guides from grant to exercise
Employee Stock Options
An employee stock option is a contractual right to buy a fixed number of shares at a fixed price after a vesting period. It is not a share and carries no shareholder rights until exercised.
Option Plan
A stock option plan is the legal framework a company adopts to grant options to employees. It sets the rules that apply to every grant made under it, including vesting, exercise and leaver provisions.
Option Grant
A grant agreement is the document that gives a specific employee a specific number of options under the company's plan. It fixes the strike price, vesting schedule and the deadlines that follow leaving the company.
Exercise Price
The exercise price, or strike price, is the fixed amount an option holder pays per share to exercise. It is set at grant and determines both the option's built-in value and its tax treatment.
Exercising Options
Exercising an option means paying the strike price to convert it into actual shares. Employees can typically pay in cash, exercise cashless at a liquidity event, or in some plans exercise early before full vesting.
Exercise Window
The exercise window is the period after an option holder stops working for the company during which they can still exercise their vested options. A short window can force employees to exercise and pay tax quickly or lose their options entirely.
Vested Options
Vesting is the process by which an employee earns the right to exercise their options over time, usually tied to continued service. Only vested options can be exercised; unvested options are typically forfeited on leaving.
Leaving the Company
What happens to your options when you leave depends on whether you are classed as a good or bad leaver, whether your options have vested, and how long the exercise window is. These terms are set out in the option plan and grant agreement, not decided case by case.
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