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Share Option Agreement for Canada

Share Option Agreement Template for Canada

A comprehensive legal document governed by Canadian law that establishes the terms and conditions under which a company grants stock options to an individual, typically an employee, director, or consultant. The agreement outlines crucial details including the number of shares subject to the option, exercise price, vesting schedule, and exercise conditions, while ensuring compliance with Canadian securities regulations, provincial laws, and tax requirements under the Income Tax Act. It includes provisions for option exercise, termination, and transfer restrictions, incorporating necessary protections for both the company and the option holder.

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What is a Share Option Agreement?

The Share Option Agreement is a critical document used by Canadian companies to grant stock options to employees, directors, consultants, or other eligible individuals. It serves as a formal contract that outlines the rights and obligations of both the company and the option holder, detailing specific terms such as the number of shares, exercise price, vesting schedule, and exercise conditions. This agreement must comply with Canadian federal and provincial securities laws, corporate regulations, and tax requirements, particularly the Income Tax Act provisions regarding stock option benefits. Companies typically use this agreement as part of their compensation and retention strategy, enabling them to align stakeholder interests with company performance while maintaining compliance with Canadian regulatory frameworks. The document includes necessary provisions for different scenarios such as termination of employment, change of control, and share capital adjustments.

What sections should be included in a Share Option Agreement?

1. Parties: Identification of the company granting the options and the option holder

2. Background: Context of the option grant, relationship between parties, and reference to any option plan

3. Definitions: Key terms used throughout the agreement including Option Shares, Exercise Price, Grant Date, Expiry Date, etc.

4. Grant of Option: Specific details of the option grant including number of shares, exercise price, and grant date

5. Vesting Schedule: Timeline and conditions under which options become exercisable

6. Exercise of Options: Process and requirements for exercising options, including payment methods and notice requirements

7. Term and Expiration: Duration of the option grant and circumstances of expiration

8. Restrictions on Transfer: Limitations on transferability of options and option shares

9. Termination of Service: Impact of employment/service termination on options

10. Compliance with Laws: Requirements for compliance with securities laws and other regulations

11. Tax Matters: Tax obligations and responsibilities of both parties

12. General Provisions: Standard legal provisions including notices, amendments, governing law, etc.

What sections are optional to include in a Share Option Agreement?

1. Change of Control Provisions: Include when specific provisions are needed for corporate transactions or change in ownership

2. Lock-up Agreement: Include for pre-IPO companies or when trading restrictions are required

3. Shareholder Rights: Include when specifying voting rights, dividend rights, or other shareholder privileges

4. Non-Competition and Confidentiality: Include when additional restrictive covenants are required

5. Market Standoff: Include for companies planning public offering

6. Drag-Along Rights: Include when majority shareholders need ability to force option holders to join in sale

7. International Provisions: Include when option holder is in different jurisdiction

8. Cashless Exercise Provisions: Include when allowing exercise without cash payment

What schedules should be included in a Share Option Agreement?

1. Notice of Exercise: Form to be completed when exercising options

2. Option Plan: Copy or summary of the company's stock option plan

3. Vesting Schedule Details: Detailed breakdown of vesting dates and conditions

4. Shareholders' Agreement: Agreement that option holder must sign upon exercise

5. Tax Election Forms: Relevant tax forms including Section 85(h) election form

6. Consent of Spouse: Spouse's acknowledgment and consent where required by law

7. Board Resolution: Copy of board resolution approving option grant

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Canada

Publisher

Ƶ

Document Type

Stock Agreement

Cost

Free to use
Relevant legal definitions





















































Clauses









































Relevant Industries

Technology

Financial Services

Professional Services

Manufacturing

Healthcare

Biotechnology

Energy

Mining

Real Estate

Retail

Telecommunications

Software

Consulting

E-commerce

Media and Entertainment

Relevant Teams

Legal

Human Resources

Finance

Executive Leadership

Board of Directors

Corporate Governance

Compensation

Administrative

Investor Relations

Relevant Roles

CEO

CFO

General Counsel

HR Director

Compensation Manager

Corporate Secretary

Board Member

Employee

Consultant

Executive Officer

Senior Manager

Department Head

Vice President

Chief Technology Officer

Chief Operating Officer

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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