The 90 day default and its problem
Many option plans, following a convention that spread from the United States, give departing employees only 90 days after termination to exercise vested options, after which any unexercised options lapse. This rule is usually set out in the company's option plan document. For an employee at a private company, this can force a difficult choice: find the cash to exercise and pay any tax due within 90 days, or forfeit options they spent years vesting.
For example, an employee who vested 20,000 options at a 1.00 EUR strike, with shares now valued at 4.00 EUR, would need 20,000 EUR in cash to exercise within 90 days, plus any tax due on the 60,000 EUR gain, even though the shares cannot be sold because there is no market for private company stock, a problem that gets sharper the sooner someone ends up leaving the company.
Extended exercise windows
In response to this problem, some companies have adopted extended post-termination exercise windows, ranging from one to ten years, giving former employees far more flexibility on when to exercise and pay tax. This is increasingly seen as a more employee-friendly practice, and candidates in competitive labour markets sometimes negotiate for it.
| Window length | Employee impact |
|---|---|
| 90 days (standard) | Must exercise quickly or forfeit; common source of dry income pressure |
| 1 to 2 years | More breathing room to plan for the tax cost |
| Up to 10 years | Employee can wait until closer to a liquidity event |
What to verify in your grant agreement
- The exercise window length and whether it differs for good versus bad leavers.
- Whether the window is measured from the last day of employment or from a formal termination notice date.
- Whether unvested options are forfeited immediately or subject to any acceleration on specific triggers such as an acquisition.
- Whether the company has confirmed the window in writing in the grant agreement, since verbal assurances are not enforceable.
Always read the specific grant agreement, since exercise window terms vary company by company even within the same country.
Deadlines after you leave: what to check
- What happens if I do not exercise within the window?
- Vested options that are not exercised before the window closes lapse permanently and cannot be recovered.
- Does the exercise window apply to unvested options too?
- No. Unvested options are typically forfeited on the day employment ends, regardless of the exercise window, which only applies to already-vested options.
General information for founders, not legal or tax advice. Thresholds and rates change, so confirm the current position with an adviser in the relevant country before granting.