Employee ESOP’s

By Ashwin Adhikari on August 25, 2012 7 Comments / 1406 views

Can someone please elaborate on how the distribution/allotment of ESOP’s work in a start up? I shall be joining a start-up soon and have negotiated for it. In the offer letter they have mentioned the number of shares that i shall be allotted. So can you please throw light on

1) Ideally when will/should the shares be allotted to me? Is there any time frame for that?

2) Will i have to pay certain amount for it?

3) Can they go back and say you are not eligible for ESOP citing some technical reason or other.

4) Is there any recourse if they do not honor this inspite of clearly mentioning it in the offer letter.

or somebody can just give an insight as to how the entire thing works so that it helps all of us who are working for start ups for the first time…..

Comments

Ashwin Adhikari

7 Comments

Alok Rodinhood Kejriwal August 25, 2012, 4:59 pm

WOWOW question

Will be answered soon
Ashwin Adhikari August 25, 2012, 6:41 pm

Have i earned the Rodinhood Tshirt :))))
Ashwin Adhikari September 4, 2012, 1:17 pm

No answer as yet…..
Deepak Mittal September 5, 2012, 11:42 am

Hi Ashwin,

Some quick thoughts in response to your questions…

1) ESOPs as a number alone usually signifies nothing. Insist on a percentage of shares howsoever small or big it may be. A good ESOP plan must clearly ensure that any modification in the company’s capital structuring should not be detrimental to the interest of those under an ESOP plan for it to hold any long term value.

2) You will have to pay an amount equal to the exercise price x number of the vested shares to get the shares transferred in your name.

3) Vested ESOPs shouldn’t be a B-grade equity. i.e. you should enjoy full rights that a normal shareholder would have for the vested and paid by ESOPs. You shouldn’t be restricted to sell for example.

4) The ESOP policies are usually designed in a manner where the control remains with the board of the company so technically a company can make modifications to the ESOP plan if it wishes to.

5) You can always take the legal way, however you must be strong on paper/contractually to be able to even hold a case.

Best of Luck with your new job!
asha chaudhry April 8, 2013, 4:03 pm

ashwin… i believe you’ve commented on this thread of alok’s

https://www.therodinhoods.com/forum/topics/esops-for-startups-by-rodinhood

well this post was written after being inspired by your question. stay tuned to find out what you’ve won!!!
Ashwin Adhikari April 8, 2013, 4:15 pm

Have i seriously won something???? I shall come and collect it from Alok ::))
asha chaudhry April 8, 2013, 5:07 pm

ashwin…

alok doesn’t have the goodies!!

🙂