A stock option plan for a Canadian private company: the plan document, board approval, the form of option agreement, vesting and exercise terms, and the process every grant follows. Set up once, used for every person after.
A plan is the rulebook; a grant is one person’s options under it. The kit builds the rulebook. Grants follow through the add-on, one at a time or in batches. Prepared by the firm’s team under the lawyer’s review.
The plan document: who is eligible, the size of the pool, how the exercise price is set, the standard vesting, what happens on departure and on a sale of the company, and how the board administers it. Adopted by board resolution, with the shareholder approval your articles or shareholders’ agreement require.
The agreement each holder signs: number of options, exercise price, vesting start and schedule, expiry, and the holder’s agreement to be bound by the shareholders’ agreement on exercise. A standard four-year schedule with a one-year cliff, adjustable per grant.
Each actual grant under the plan: the board resolution approving it, the individual option agreement completed and signed, the grant notice, and the option ledger and cap table updated. Priced per grant, from CAD $1,250, with batches of grants quoted at scope review.
How a holder exercises and pays, how long they have to exercise vested options after leaving, what happens to unvested options when they go, and what happens to all of them if the company is sold — the terms an acquirer reads first. Written into the plan so no grant has to reinvent them.
The pool sized and recorded, an option ledger that tracks each grant from approval to exercise or lapse, and a fully diluted cap table showing the pool, granted and ungranted — the numbers an investor asks for before a term sheet.
A scope review first, because plans raise tax and securities questions that change the work. Then an intake call with the lawyer to settle the pool, eligibility, pricing and vesting, one consolidated revision round, and a delivery call through the plan and the process for each future grant.
Three decisions, taken with the lawyer on the intake call and with your accountant on the tax. What follows is the explanation given on that call.
Three things founders call an ESOP. Only one of them is what most startups want.
A stock option plan gives each holder the right to buy shares later at a price fixed on the grant date. Nothing is owned until the option is exercised, so the cap table does not change with each grant, and every holder is on one set of rules. In Canada this is what “ESOP” usually means, and it is what this kit sets up.
In the United States an ESOP is something else: a retirement trust that buys the company’s shares for its employees, used mostly in succession planning for established businesses. A founder who has read about that structure is usually looking for an option plan.
A phantom plan — phantom shares, share appreciation rights, deferred or restricted share units — pays cash measured by the value of the shares without issuing any. It suits a company that wants to reward people without adding shareholders, and it is simpler to run, but the payment is taxed as salary when made and the tax rules limit how long it can be deferred. A phantom plan is scoped separately when it is the right answer; the intake call says which it is.
A percentage of the company set aside for the plan. Big enough for the next two years of hiring, no bigger.
The plan reserves a number of shares, usually expressed as a percentage of the fully diluted company. At the seed stage ten to fifteen percent is the range investors expect; a company that will hire heavily before its next round sits at the top of it, one with a small team at the bottom.
The pool is a ceiling, not a promise: options are granted from it as people join, and what is not granted stays with the founders.
The size matters at a financing because investors usually ask for the pool to be created or topped up before their money goes in, so that the dilution falls on the founders rather than on them. A pool sized to a real hiring plan is the founders’ best answer to that request, and the kit’s cap table shows the pool granted, ungranted and fully diluted so the conversation is about numbers rather than percentages of percentages. Grants to the founders themselves usually come from shares, not the pool — the Equity Structuring Kit.
The price is set by the board at the shares’ fair market value on the grant date. Get it wrong and the holder pays for it.
An option is worth the difference between the share price on the day it is exercised and the exercise price fixed when it was granted. Set the exercise price at fair market value at grant and the holder is rewarded only for growth from that day — which is the point — and the tax treatment the rules offer is preserved.
Set it below value and the holder can lose a deduction and pick up an immediate taxable benefit; set it far above value and the option is worth nothing as an incentive. Early on the value is nominal and the board’s resolution says so; after a financing, the round price is the evidence, and a valuation may be needed.
For a Canadian-controlled private corporation the tax works in the holder’s favour in general terms: an employee is usually taxed on the option only when the shares are sold rather than when the option is exercised, and a deduction may reduce the tax where the conditions are met, one of which is holding the shares for two years. Options from a company that is not a CCPC are taxed at exercise, with a deduction subject to limits. The plan is drafted to keep those benefits available; whether they apply to your company and each holder is your accountant’s call, and the scope review asks whether they have looked. Grants to employees, officers, directors and consultants also rely on a prospectus exemption under Ontario securities law that usually needs no report, and the plan confirms it.
For companies that want to offer options before the paper exists. Intake-gated because plans raise tax and securities questions, and because a promise already made to a hire changes what has to be drafted.
“You’ll get one percent” in an offer letter is a promise the company cannot yet keep and cannot easily price. Without a plan there is no exercise price, no vesting, no approval and no record — and an investor’s diligence finds all four missing.
One plan, adopted and recorded, that every grant is made under — so a new hire’s options are a resolution and a signature, not a project, and the cap table always shows what has been promised.
A Canadian private company, standard plan terms, holders in Canada, and no investor negotiation over the pool: the plan document, its adoption, the form of option agreement, the vesting and exercise terms, the pool recorded, the ledger and cap table set up, and the calls. Each grant under the plan is the Option Grant Add-on, from CAD $1,250, and grants made in the same engagement as the plan are batched at scope review. The fee is confirmed in writing before any work begins; HST is separate. Tax, valuation and a phantom or share-unit plan are scoped on their own by the same firm.
Request ESOP Scope ReviewSubmitting intake does not create a lawyer-client relationship. Work begins after conflict review, scope confirmation and written engagement terms.
A standard plan for holders in Canada is the kit; each grant is the add-on. Investor negotiation over the pool, a valuation, or holders abroad are scoped on their own after the review.
The plan and its machinery. Grants through the add-on.
Same firm, its own engagement.
After the founders’ agreement and the first hires, before options are promised to anyone. Each step is its own engagement, subject to intake and conflict review.
Option holders join the shareholders’ agreement when they exercise, so the agreement comes first and the plan is drafted to fit it.
View Startup KitThe employment, contractor and advisor agreements refer to the plan rather than promising equity themselves; the grant follows under the plan.
View Build a Team KitWhile the shares are worth little, restricted shares with vesting can suit the earliest people better than options. The section above says when.
View Equity Structuring KitInvestors ask for the pool before the money goes in. A plan already adopted, with a pool sized to a hiring plan, is the founders’ answer.
View Funding KitGrants, exercises, departures and the ledger kept current, on standing terms rather than add-on by add-on once hiring is continuous.
Request Ongoing Support ReviewThe founders page sets the kits out in the order a company needs them. A pool negotiated with an investor, a phantom plan or holders abroad is advisory work by the same firm, scoped in phases.
View Founders & StartupsThe review confirms the kit fits and fixes the fee; the lawyer settles the pool, pricing and vesting on the intake call; the team drafts under the lawyer’s review; one round of comments; the plan adopted and the first grants made.
Who will hold options, where they are, what has already been promised, whether a financing is coming, and whether the accountant has looked at the tax. The firm confirms the kit fits, or says what does.
Fee and scope confirmed in writing, including any grants batched with the plan. Then the call with the lawyer: pool size, eligibility, how the price is set, the standard schedule, departure and sale terms.
The plan, the resolutions, the form of option agreement, the ledger and cap table. One consolidated round of comments, incorporated within scope.
The plan adopted and filed in the minute book, the first grants made under the add-on if they were batched, and the delivery call through the process for every grant that follows.
Yes: the plan document, its adoption by the board and by the shareholders where your articles or shareholders’ agreement require it, the form of option agreement and grant notice, the vesting and exercise terms, the pool recorded, and the ledger and cap table set up. It is drafted for a Canadian private company with holders in Canada and confirmed at scope review before any work begins.
Each grant is the Option Grant Add-on, from CAD $1,250: the board resolution approving it, the holder’s option agreement completed and signed, the grant notice, and the ledger and cap table updated. Grants made in the same engagement as the plan — the two hires already waiting, say — are batched and priced at scope review. Companies that grant continuously usually move the grants onto Ongoing Counsel Support.
The paperwork for one person’s options under an adopted plan. The board approves the grant and fixes the exercise price at fair market value on that date; the holder signs the option agreement with their number, price, vesting start and schedule; the grant notice goes in their file; the option ledger and the fully diluted cap table are updated. It is priced per grant so that a new hire’s options are a known cost, and it works under a plan the firm drafted or, after review, an existing one.
Options and restricted shares are different instruments, and the kit is the first. An option is a right to buy shares later at a fixed price; the holder is not a shareholder until they exercise. Restricted shares are issued now and earned over time by the company’s repurchase right falling away; the holder is a shareholder from the start. Founders and the earliest people often take shares while they are worth little, which is the Equity Structuring Kit; the team that follows takes options under this plan.
Large enough for the hires planned before the next financing, and no larger. Ten to fifteen percent of the fully diluted company is the range investors expect at seed. The pool is a ceiling: what is not granted is not given away, and it can be increased later by resolution. The section above explains why the number matters at a round, and the intake call settles it against your hiring plan rather than a rule of thumb.
The plan is drafted to preserve the treatment the tax rules offer holders of options in a Canadian-controlled private corporation, and the board resolution records the fair market value it relies on for the exercise price. Whether that treatment applies to your company and each holder, and what the shares are worth once the company has raised money or has revenue, are your accountant’s and, where needed, a valuator’s; the scope review asks whether they have looked, and the firm coordinates with them. The rules on the stock option deduction have moved in recent years, which is one more reason the page does not state a rate.
The kit is for holders in Canada. A holder in the United States brings that country’s tax and securities rules with them — option pricing and reporting there are different — and the firm scopes that as advisory work, with the US-law piece delivered through its US alliance rather than a second firm. A holder in the UAE is handled through the firm’s own licence there. See Canada–US and Canada–UAE.
The kit delivers the ledger and the fully diluted cap table as working documents, which is what most companies need until a financing. Loading the plan and grants onto a cap-table platform is a separate, short piece of work once the company chooses one, and the documents are drafted so that the data transfers cleanly.
The kit gives you the plan and the numbers to negotiate with; the negotiation itself is part of the financing. A pool created or topped up as a condition of a round is documented with the round — through the Funding Kit for a SAFE or note that asks for it, or as advisory work on a priced round. Having the plan adopted before the term sheet is what keeps that conversation short.
Options are securities under Ontario law, and every grant needs a prospectus exemption. Grants to employees, officers, directors and consultants rely on an exemption that usually requires no report to the regulator, and the plan is drafted to it, so there is nothing to file for ordinary grants. A grant to someone outside those categories, or to a holder abroad, is flagged at scope review and scoped separately if a filing is needed.
Both happen. An existing plan is reviewed at scope review; if it works, grants proceed under it through the add-on, and if it needs amending, that is quoted first. Options promised or granted with no plan behind them are papered properly under the new plan — usually by a grant dated now on the terms originally promised, with the board’s resolution recording what was agreed — and the intake asks for every promise so that nothing is missed.
The scope review and the intake call are with Khaled El Fauri, a member of the Bar of Ontario, who settles the pool, pricing and vesting and reviews the plan before delivery. The firm’s team prepares the documents to the firm’s standard forms, which is what keeps a lawyer-led plan at a starting fee and a grant at a fixed one.
You have an adopted plan in the minute book, a form of grant, a ledger, and a cap table that shows the pool. Each new hire’s options are then a grant under the add-on or under Ongoing Counsel Support; the Funding Kit follows when money is coming in. The founders and startups page sets the sequence out in full.
Tell us who will hold options and what has already been said to them. The scope review confirms the fit and the fee, the intake call sizes the pool and sets the terms, and every grant after that is a resolution and a signature.