Optionholders should consult their personal tax advisors to learn more. The optionholder is eligible to vote even as to unvested shares to the extent the shares are voting shares, may receive dividends, and can request company financial information. Not necessarily, but many of the tax advantages of early exercise depend on the filing of a Section 83 b election. Section 83 b elections , to be effective, must be filed within thirty 30 days following the date of exercise. One meaningful downside to the company of allowing optionholders to early exercise is that the company can face disputes with optionholders who neglect to make this filing.

Such optionholders might fault the company for not giving adequate notice of the deadline, or of the consequences of failing to file, or might even expect the company to handle the filing for them. The time and cost of educating optionholders about the 83 b election, coupled with the potential for disputes with people who might not complete their filing in time is enough for many companies to steer away from allowing early exercise. If the optionholder early exercises, the company will retain the right to repurchase the stock that is unvested when the optionholder terminates service.

The repurchase price is generally the lower of the exercise price or the then-current fair market value of the stock. This repurchase right will lapse as the stock vests. Companies generally would not have the right to repurchase any of the vested stock. The company generally holds the unvested stock in escrow to facilitate the repurchase in the event the person leaves the company, and also collects from the optionholder at the time of exercise all of the signed documents that would be required to re-sell the unvested shares back to the company.

The company only uses those documents if and when the person leaves the company while holding unvested shares. Document Generator.

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