Employee Stock Option Plan (ESOP)
The pool of equity set aside for employees, and the rules for granting it.
A formal plan that reserves a percentage of a company's shares to grant as options to employees over time, giving them the right to buy shares at a fixed price later. Needs board approval and proper documentation to avoid tax and securities issues down the line.
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- Lawyer reviewed
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- Surprise bills
- $0Surprise bills
What an Employee Stock Option Plan should include
Pool size — how many shares are reserved, and how that reads on the cap table.
Who is eligible — employees, contractors, advisers, and on what basis each may receive a grant.
Exercise price — how it is set at grant, and who approves it.
Vesting — the default schedule, including any cliff, and who may vary it.
Exercise windows — how long a departing holder has to exercise, which is the term employees notice most.
Administration — board approval, the grant paperwork, and the register of who holds what.
When you need one
Before your first option grant, not after it. Grants made without an adopted plan and board approval are one of the more common findings in diligence, and cleaning them up later usually means going back to the holders.
How Ruby drafts it
Tell us what you need
Describe the agreement, your business context, and how fast you need it. A few smart questions, not a legal questionnaire. Your price and turnaround are confirmed before anything starts.
Ruby drafts it
Once pricing is confirmed a qualified Ruby lawyer is assigned to your file, and the first draft is built from your answers and real Canadian statute.
A licensed lawyer reviews every line
A lawyer licensed in Canada reviews and finalizes the document before it reaches you, and writes the plain-language summary that comes with it.
Signed, stored, and yours to revisit
You get the final agreement and its summary, stored so you can come back to it rather than hunting through email for the current version.
The fee is set before any of that starts. Hourly billing moves as scope does; a flat fee is one number, confirmed in writing, that doesn’t change after the work is done. See how Ruby prices agreements.
Or did you mean one of these?
These get confused with an Employee Stock Option Plan often enough to be worth ruling out before you buy the wrong document.
Questions people ask
Enough to cover the hires you plan before the next round, which for early-stage Canadian companies commonly lands in the ten-to-twenty percent range. Investors will often ask for a specific pool as a condition of a financing, so it is worth understanding the dilution before that conversation.
Often yes, depending on the plan and on the securities and tax considerations that apply to your company. It needs to be contemplated by the plan, and it is worth confirming the treatment before granting rather than assuming employees and advisers are the same.
Unvested options are typically forfeited, and vested options can usually be exercised within a window set by the plan. That window is often short, and it is the term that most affects whether departing employees actually realise anything.
Looking for the plain definition rather than the document? See Employee Stock Option Plan (ESOP) in the Ruby legal glossary.
This page is general information about Canadian business law and is not legal advice. Laws differ by province and change over time, and how they apply depends on your circumstances. For advice on your situation, speak with a lawyer licensed in your province.
Need a Employee Stock Option Plan?
Ruby drafts it for a flat $799 CAD, confirmed before any work begins, with a licensed Canadian lawyer on every document.