How to change or annul an option agreement

Qualified Employee Stock Options (“QESOs” or “Kvalificerade Personaloptioner” in Swedish) are a very attractive way of incentivising your employees. But sometimes you need to change an option agreement that you have made with an employee. The reasons could be various: you may discover that you made an error when writing the agreement, or you may want to give fewer or more options, or adjust the strike price.

Altering an options agreement that you have already entered into is generally not a good idea. For example, if you lower the strike price, in order to reflect a lower valuation of the company, it is likely that this will be considered a new agreement for tax purposes, which means that you must initiate a new three year period. While it would of course be possible to also change the dates for when the options become vested, it is much cleaner to annul the old agreement and write a new and correct one.

How to annul the agreement

But how do you annul an agreement that you already signed? Simple: you sign an annulment agreement, that clearly specifies that the old agreement no longer is valid. To simplify, we have made a template for this, which you can donwload here.

Is it necessary to sign an annulment agreement if an employee leaves, and thus no longer is eligible to exercise the options? No. In our standard QESO agreement, this is already dealt with, so there is no need to make a special agreement about that.

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