Simple Stock Option Agreement for Canada

Simple Stock Option Agreement Template for Canada

A Simple Stock Option Agreement is a legal document used in Canadian jurisdictions to grant stock options to employees, consultants, or other eligible participants. The agreement outlines the terms and conditions under which the optionee may purchase shares in the company at a predetermined price within a specified period. This document complies with Canadian securities laws, corporate regulations, and tax requirements, including provisions for the Canada Revenue Agency's treatment of stock options. It details vesting schedules, exercise procedures, and addresses key regulatory compliance matters specific to Canadian jurisdictions.

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What is a Simple Stock Option Agreement?

The Simple Stock Option Agreement serves as a fundamental instrument for Canadian companies looking to provide equity-based compensation to their employees, directors, consultants, or other eligible participants. This document is commonly used when a company wants to align the interests of key personnel with corporate success by offering them the right to purchase company shares at a predetermined price. The agreement must comply with various Canadian regulatory requirements, including provincial securities laws, the Income Tax Act, and corporate legislation. It typically follows the framework established by the company's stock option plan and includes essential details such as grant size, exercise price, vesting schedule, and exercise terms. The Simple Stock Option Agreement is particularly vital for startups and growing companies in Canada that want to attract and retain talent while managing cash flow by offering equity incentives.

What sections should be included in a Simple Stock Option Agreement?

1. Parties: Identification of the company granting the options and the optionee receiving them

2. Background: Context of the option grant, including the company's stock option plan reference and authority to grant options

3. Definitions: Key terms used throughout the agreement including 'Option', 'Exercise Price', 'Shares', 'Plan', 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 the options become exercisable

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

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

8. Regulatory Compliance: Acknowledgment of securities laws and other regulatory requirements

9. Tax Matters: Basic tax implications and responsibilities of the optionee

10. Transferability Restrictions: Limitations on the ability to transfer or assign the options

11. General Provisions: Standard contract clauses including notices, amendments, governing law, and entire agreement

What sections are optional to include in a Simple Stock Option Agreement?

1. Change of Control Provisions: Special terms that apply in case of a merger, acquisition, or other change in company control

2. Employment Relationship: Clarification that the option grant does not affect employment status (used when optionee is an employee)

3. Shareholder Rights: Clarification of rights (or lack thereof) before exercise of options

4. Clawback Provisions: Terms allowing the company to recoup options or proceeds in certain circumstances

5. Lock-up Agreement: Restrictions on sale of shares during specified periods, particularly relevant for pre-IPO companies

6. Non-Competition and Confidentiality: Additional restrictive covenants tied to the option grant

7. Market Standoff Agreement: Restrictions on sale during public offerings, used for private companies planning to go public

What schedules should be included in a Simple Stock Option Agreement?

1. Schedule A - Notice of Exercise: Form to be completed by optionee when exercising options

2. Schedule B - Option Grant Details: Specific details of the grant including number of shares, exercise price, and vesting schedule

3. Schedule C - Stock Option Plan: Copy or summary of the company's stock option plan

4. Appendix A - Tax Election Forms: Required tax forms including Section 7 election forms for Canadian tax purposes

5. Appendix B - Consent of Spouse: Spousal consent form if required by applicable law or company policy

Authors

Alex Denne

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

Jurisdiction

Canada

Publisher

Genie AI

Document Type

Stock Agreement

Cost

Free to use
Clauses
Relevant Industries

Technology

Financial Services

Professional Services

Manufacturing

Healthcare

Retail

Energy

Mining

Telecommunications

Biotechnology

Software Development

E-commerce

Consulting

Media and Entertainment

Relevant Teams

Human Resources

Legal

Finance

Executive Leadership

Corporate Governance

Compensation and Benefits

Administrative Services

Payroll

Compliance

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Human Resources Director

Legal Counsel

Corporate Secretary

Compensation Manager

Stock Plan Administrator

Benefits Manager

Senior Software Engineer

Product Manager

Sales Director

Department Head

Vice President

Board Member

Executive Director

Senior Consultant

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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