[LRUG] Equity/Stock/Share Options: Survey

[Glenn Gillen]

My point was if there is no exit event before you leave the company.


 If you don't exercise yourself that equity completely vaporises within 90 days of you leaving. And statistically speaking you leaving the company prior to a liquidity event is the most likely outcome for all startups. 


G

On Tue, Aug 5, 2014 at 2:32 PM, Paul Robinson <paul at iconoplex.co.uk>
wrote:

> On 4 August 2014 15:24, Glenn Gillen <glenn at rubypond.com> wrote:
> The pattern I've seen most regularly and that I find particularly
>> distasteful and borderline exploitative is below market rates and "equity"
>> in the form of options.
> Others have pointed this out but to flesh it out a bit: in the UK, HMR&C
> will not tax options when granted, only when realised (i.e. sold). Further,
> options held under an EMI scheme will only be taxed at 20% when realised.
> Shares would be a straight capital gain and taxed at the appropriate rate
> (typically 40%+).
> So the options are in fact doing you a massive favour.
> You do not want shares unless you're paying for them.
> If they're coming to you for "free", you want options, and you want them
> under an EMI scheme. Every. Single. Time. Trust me.
>> So not only are you taking a pay cut, but at some point in the future you
>> need to find additional cash to exercise those options and actually get
>> your equity.
> Again, others have pointed this out, but to be clear that is only the case
> if you do not wish to immediately exchange your shares as soon as you have
> exercised the option - i.e. at an exit event.
> Most exit events are going to involve exchanging your options for cash or
> equity in the buying company, and therefore you will receive the net
> difference. The only time you are going to have to find cash is if you wish
> to exercise your options some time before you sell - rare, but possible.
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