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What can happen to your stock options if you are terminated?

On Behalf of | Feb 8, 2024 | Stock Options

Stock options are a common form of compensation meant to incentivize employees and align their interests with a company’s success. If you have stock options in a company you started or a company where you work, you may wonder what will happen if you lose your position. The answer to that depends on a number of factors, such as the terms outlined in your stock option agreement, company policies and the type of termination at issue.

It can help to understand whether your stock options are vested or unvested. Vested options are those you have earned the right to exercise, meaning you can buy the company’s stock at a predetermined price. Unvested options are those you have yet to fully earn as they are based on certain conditions like time or performance milestones.

Will you lose your stock options?

For vested stock options, the general rule is that they remain yours even after termination. This means you can still exercise them according to the terms of your agreement, typically within a specified timeframe post-termination. However, it’s best to review your stock option agreement for any specific provisions regarding termination and exercise rights.

On the other hand, unvested stock options may be subject to different outcomes. Companies often have policies in place outlining what happens to unvested options upon termination, depending on the reasons and circumstances of your departure. You could retain some or all of your unvested options or nothing at all.

It all comes down to the specifics of your situation. Reviewing your stock option agreement and related company policies can help you get a clearer picture. It’s equally prudent to consider reaching out for legal guidance for an informed assessment of your circumstances and personalized information about what you can do to protect your financial interests and legal rights.