The process to formally record full and part cancellations.
The most common reason for option cancellations is when an employee leaves the company, as per the terms of the option agreement. Other reasons can include cancellation by mutual consent or cancellation in line with other terms of the option agreement.
In any scenario, cancelling EMI or unapproved options in a compliant manner is a straightforward process.
Log in to Vestd and from the side navigation select Share schemes > All option agreements. From there, click on the agreement you want to cancel and scroll down to Cancel this option agreement.
There you’ll have the choice to cancel all of the recipient's options, part-cancel their options, or state that they're no longer an employee. Click the appropriate button to begin the cancellation.
If the option holder is no longer an employee
Enter the date they will leave the company and, if specified in the option agreement, the deadline for which they must exercise any vested options. Click Confirm to cancel the options and notify the recipient via email about the cancellation and exercise period.
Cancelling the options in line with the terms of the agreement
If the option is being cancelled in line with other terms of the agreement, please enter additional details as to what terms haven’t been met. For example:
- Failure to meet the conditions set when issuing the options
- The options have lapsed and cease to be exercisable (e.g. the period in which the options can be exercised has passed)
- The option holder has had their employment contract terminated
If you’re unsure whether the reason for cancellation falls in line with the terms of the agreement, please refer to the option agreement in the top right corner of the Agreement summary page:
Once you’ve entered the details, click Confirm to cancel the options. The platform will automatically generate Board Minutes (which will be stored in Documents) and notify the recipient of the reason for cancellation.
Cancelling options by mutual consent
When you select ‘This option is being cancelled by mutual consent' (e.g. due to an error during the allocation process, or because you have agreed to issue a fresh set of options instead), you’ll be prompted to download an Agreement for Surrender. Complete the form with the information required, then you and the recipient must sign it as a formal record of consent.
After you’ve downloaded the Agreement for Surrender, click Confim. You’ll then be taken to the Agreement summary. When both parties have signed the agreement, upload it to Vestd for your records. It will then be saved in Documents along with the Board Minutes.
The part-cancellation process is slightly different, as you will need to enter the number of options you wish to cancel. You can only cancel un-exercised options, any exercised options cannot be cancelled. Un-vested options will be cancelled first before moving on to cancelling any vested options if required.
If you're part-cancelling the options by mutual consent, the Agreement for Surrender will be on the following page, as the platform cannot pre-populate the document with the number of options you want to cancel. So be sure to download the Agreement for Surrender, fill in the required information and ensure both parties sign it, before uploading the completed document to Vestd.
Finally, if the option agreement you're part-cancelling uses time-based vesting, the automatic vesting schedule will be removed and you will need to manually vest any remaining options going forward. Once the part-cancellation is confirmed, select Enable accelerated vesting on the Agreement summary page.
Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax or financial advice.'