ESOP Documentation (Employee Share Option Plan)
This ESOP (Employment Share Option Plan) Documentation is suitable for employees of small businesses in Australia.
4.7 (18 reviews)
Last updated May 5, 2025
Under 15 minutes
Written by Edwin Montoya Zorrilla
Reviewed by Damin Murdock
Document Overview
Employee Share Option Plans (ESOPs) give startups a way to issue options to purchase shares to their employees. This provides employers with a means for attracting and retaining staff in line with shareholder interests, as the better the company performs the more financial benefit the employee will receive.
The Offer Letter is used to offer these options to eligible employees as well as outline the specific terms of the offer to each employee. The Board Resolution is required to document the approval of an employee's participation in the company's Employee Share Option Plan.
Note: in order to be eligible for the ESS Start-Up Concession, your ESOP needs to meet certain criteria. To check whether you are compliant, see ESS Start-Up Concession Eligibility Check.
Why do you need this ESOP Documentation?
An ESOP is necessary to establish your employee option plan and to set out specific terms of an offer of options to an employee. Apart from being legally compliant, it is important to clearly state any specific terms when offering options to prevent potential disputes.
Suitable for Australia
The Legal Risk Score of a ESOP Documentation (Employee Share Option Plan) Template
Our legal team have marked this document as medium risk considering:
- The document grants significant discretionary powers to the Board, including the ability to determine the terms of offers, amend offers, and decide on the vesting and exercise conditions of options, which could lead to decisions that might not always align with the interests of all participants.
- The options and their benefits are subject to specific conditions such as vesting periods and employment status, which means that if these conditions are not met, participants might lose their entitlements without compensation.
- The ESOP must be negotiated with other stakeholders, particularly existing investors, as it may dilute their holding
Participants with a basic understanding of equity options and employment-related incentives should find this document manageable but are advised to consider the implications of the Board's discretionary powers carefully.
ESOP Documentation (Employee Share Option Plan) Checklist
Complete your free ESOP Documentation (Employee Share Option Plan) with our checklist
Ensure Proper Acceptance
The participant should sign and return the Acceptance of Offer as outlined in Attachment 1 to formally accept the terms and participate in the Employee Option Plan.
Update Company Records
Once the Acceptance of Offer is received, the company should update its records to reflect the new optionholder's status and ensure compliance with the Employee Option Plan's provisions.
Monitor Vesting and Exercise Periods
Participants and the company should closely monitor the vesting dates and exercise periods to ensure options are exercised within the allowable timeframe specified in the plan.
What is included in this ESOP Documentation
- Company details
- Employee details
- Offer letter and acceptance of offer letter
- Administration of option plan and delegation
- Treatment of options for leavers
- Issue of ordinary shares in respect of exercising options
- Procedure on exit event
- Listings
- Reorganisation event
- No effect
- Exercise price of options and market value of shares
- Number of options
- Default vesting conditions or customised vesting conditions
- Restrictions on disposal of options
- Board resolution to approve participation
- Option exercise notice
Further information:
View Sample ESOP Documentation (Employee Share Option Plan)
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