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MrRobot1992

Question on ESOPs

Hi, I have an ESOPs related question. Appreciate any inputs.

Consider a Series B startup providing an employee with 5000 shares. After 2 years, 2000 shares are vested and exercised by the employee. The stocks were never liquidated because the company didn't conduct buyback nor went IPO.

Now, assume the company lays off that employee after 2 years,

  • Can he still hold the vested and exercised 2000 shares?
  • If yes, then can he sell those stocks during future buyback even if he isn't an employee?
  • Will the company provide accelerated vesting for the remaining 3000 shares during layoff? (not mentioned on offer letter)
9mo ago
StartupBaba
StartupBaba
Stealth9mo

1- Yes

2- It will be decided by the company

3- Usually No, However it will be decided by the company

hellomoto
hellomoto
Freshworks9mo

This is correct.

Please note - you have asked the question assuming that you have exercised these 2000 shares - this usually doesn't happen. People usually do not exercise vested shares, because you will need to pay tax on exercise which comes up to a hefty sum. So exercise and liquidation is usually done together. Many companies allow employees to exercise shares even after separation (but check your ESOP policy to be sure).

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