Granting options over existing shares
How to grant options over shares a current shareholder already holds, and how the exercise works.
Last updated: 02/09/2026
TL;DR: Most option schemes create new shares when options are exercised. On Vestd, the UK's FCA regulated share scheme and equity management platform, you can also grant options over shares an existing shareholder already holds, which keeps the total company share count the same and avoids dilution. It works with most option schemes, including EMI. It needs a signed Share Delivery Agreement and bespoke resolutions, and only Vestd staff can create this type of pool, so contact support@vestd.com to start. At exercise the shares move by stock transfer rather than being newly issued, the option holder pays the shareholder directly, and stamp duty is due if the total exercise price is over £1,000.
Authorising a new option pool is the usual route and the one most companies take. Granting over existing shares is the alternative when you'd rather not increase the total share count and avoid dilution. It differs from the standard ‘new shares’ route so this guide covers the whole thing, from creating the pool through to issuing the share certificate. It's written for company admins, option holders and shareholders, and each section says who it's for.
Contents 📋
- A few terms you'll see
- Why companies use existing shares
- How to set up the option pool
- Granting options to recipients
- How exercise works differently
- Exercising: for the option holder
- Exercising: for the company and shareholder
- Stamp duty
- FAQs
A few terms you'll see
These come up throughout the guide, so we've explained them once here:
- Options over existing shares: options granted over shares a shareholder already holds, rather than over new shares issued when the option is exercised.
- Share Delivery Agreement (SDA): the formal agreement between the shareholder supplying the shares and the company granting the options. Older material may call this a Share Supply Agreement, or SSA.
- Option pool: the shares set aside for a share scheme. For this arrangement the pool is made up of one shareholder's existing shares rather than newly authorised ones.
- Exercise price: what an option holder pays for each share when they exercise. Here it's paid to the shareholder supplying the shares, not to the company.
- Stock transfer form: the document that moves shares from one person to another. It has to be signed by the person transferring the shares.
- Stamp duty: the tax HMRC charges on share transfers where the consideration is over £1,000. See Stamp duty.
Why companies use existing shares
Granting options over existing shares protects current shareholders, and prospective investors, from dilution. Rather than authorising an extra 5 to 10% of shares for a scheme, you draw on shares that already exist, so the total share count doesn't move.
It tends to suit companies where:
- You're preparing for investment and want to keep the cap table clean.
- An existing shareholder wants to contribute shares as part of a team incentive plan.
- You'd rather not go through the process of authorising new shares.
The trade-off is that one shareholder carries the dilution instead of everyone, and that shareholder has to agree to it in writing before anything can be set up.
How to set up the option pool
Who this is for: company admins.
Only Vestd staff can create this type of option pool. Email support@vestd.com to get started, and we'll take you through the steps below.
Step 1: Sign the Share Delivery Agreement
We'll send a Share Delivery Agreement (SDA) to your admin user, who is our point of contact for your company. It's the agreement between the shareholder supplying the shares and the company granting the options. Sign it, have it witnessed and return it to us.
Step 2: Resolutions
Using the date on the signed SDA, we'll prepare bespoke resolutions for the relevant directors and shareholders to sign. We'll send you a link to check the details on Vestd. When you're happy with them, click Send for signing.
Step 3: Authorisation confirmed
Once the resolutions have passed, the authorisation is complete and we can create the pool.
Step 4: Name and configure the pool
We'll ask you to name the pool and confirm how many shares are going into it. Something like "[Shareholder name]'s option pool" works well, because it makes this pool easy to tell apart from any others you have on Vestd.
Step 5: Review and confirm
We'll attach the signed SDA and the resolutions to the option pool on Vestd so all the paperwork sits in one place, then send you a link to review the final details. Click Confirm and the shares are ready to distribute.
Granting options to recipients
Who this is for: company admins.
Once the pool is ready, granting options works exactly as it does for a standard scheme. See:
How exercising works differently
Who this is for: everyone.
Because the shares belong to a shareholder rather than the company, exercise doesn't work the way it does on a standard scheme. Three things change:
| Standard scheme | Options over existing shares |
| New shares are issued on exercise | Existing shares move by stock transfer |
| The option holder pays the company | The option holder pays the shareholder directly |
| No stamp duty, because newly issued shares aren't a transfer | Stamp duty is due if the total exercise price is over £1,000 |
For more on transfers, see our guide Stock transfers made simple.
Exercising: for the option holder
Who this is for: option holders.
Step 1: Submit your exercise request
Go to your My Equity dashboard and open your agreement summary. Click Exercise request and enter the number of options you want to exercise. For a full walkthrough, see our guide on how to exercise options.
Step 2: Pay the shareholder
Once your request is in, pay the shareholder the total exercise amount directly. Contact the company to arrange it.
Step 3: Stock transfer form
After your payment is confirmed, the company sends a stock transfer form to the shareholder to sign.
Step 4: Stamp duty, if it applies
If the total exercise price is over £1,000, you'll need to pay stamp duty to HMRC. See How to pay stamp duty for a stock transfer 💸 for the detail. Your company admin has to upload your proof of payment to Vestd before the transfer can complete.
Step 5: Transfer complete
Once the stock transfer form is signed and any stamp duty confirmation is uploaded, the shares transfer to you legally and you'll get a share certificate.
Please note: you can't split an exercise into several smaller requests to keep each one under £1,000 and avoid stamp duty. HMRC treats these as linked transactions, adds the consideration together, and can fine you if it spots this.
Exercising: for the company and shareholder
Who this is for: company admins and the shareholder supplying the shares.
Step 1: Receive the exercise request
You'll get an email when an exercise request comes in. Follow the link in the email, or go to Share schemes > All option agreements > Exercise requests. For a full walkthrough, see our guide on admin users processing exercise requests.
Step 2: Confirm payment
Before you process the request, check that the option holder has paid the shareholder. Once you've confirmed it, click Process exercise request.
Step 3: Stock transfer form sent
Vestd sends the stock transfer form to the shareholder to sign.
Step 4: Stamp duty, if it applies
If the total exercise price is over £1,000, the option holder pays stamp duty to HMRC. You're responsible for getting the proof of payment PDF from them and uploading it to Vestd. The transfer can't complete without it.
Step 5: Transfer complete
Once the stock transfer form is signed and any stamp duty receipt is uploaded, the exercise request is finalised. Vestd generates a share certificate for you to sign and issue to the new shareholder.
Stamp duty
Who this is for: option holders, and the company admin who collects the proof of payment.
Stamp duty applies where the total exercise price is over £1,000.
| Detail | Information |
| Rate | 0.5% of the total exercise cost |
| Rounding | Rounded up to the nearest £5 |
| Who pays | The option holder, directly to HMRC |
| What to submit | Proof of payment PDF, uploaded to Vestd by the company admin |
For step by step instructions on making the payment, see How to pay stamp duty to HMRC.
FAQs
Can a founder give options over their own shares?
Yes. This is the arrangement this guide covers. The founder, or any existing shareholder, supplies shares from their own holding and the company grants options over them. The shareholder has to sign a Share Delivery Agreement first, and only Vestd staff can create this type of pool, so email support@vestd.com to start.
Can we give employees options without issuing new shares?
Yes. Rather than authorising new shares for a scheme, you draw on shares an existing shareholder already holds. When someone exercises, the shares move to them by stock transfer instead of being newly issued, so the company's total share count doesn't change.
How do we set up an option scheme without diluting existing shareholders?
Grant the options over shares an existing shareholder already holds. Because no new shares are created, the total share count stays the same and other shareholders aren't diluted. The shareholder supplying the shares carries the reduction in their own holding instead, which is why they have to agree to it in writing before the pool can be set up.
Does the shareholder supplying the shares have to agree?
Yes. They sign a Share Delivery Agreement with the company, and the relevant directors and shareholders sign bespoke resolutions, before the option pool can be created.
What's the trade-off compared with a standard option pool?
One shareholder gives up part of their holding instead of the reduction being spread across everyone. Setup takes longer, because it needs an agreement and bespoke resolutions rather than a standard authorisation. At exercise, the option holder pays the shareholder rather than the company, and stamp duty is due where the total exercise price is over £1,000.
Can you grant EMI options over existing shares?
Yes. You can grant any type of option over existing shares, including EMI and unapproved options (you will need the right SDA). The pool is only the source of the shares, so it doesn't change which scheme you run or the conditions that apply to it. Your scheme's usual rules still apply, including the EMI eligibility conditions and HMRC notification.
Can we set this type of pool up ourselves?
No. Only Vestd staff can create an option pool from existing shares, because it needs a Share Delivery Agreement and bespoke resolutions before the pool can exist. Email support@vestd.com and we'll set it up with you.
Is a Share Delivery Agreement the same as a Share Supply Agreement?
Share Supply Agreement, or SSA, is the name we used previously. Older documents may still use it.
Who does the option holder pay when they exercise?
The shareholder who supplied the shares, not the company. This catches people out, because on a standard scheme the money goes to the company.
Is stamp duty due on every exercise?
No, only where the total exercise price is over £1,000 (specifically for granting options over shareholder shares). Below that, no stamp duty is payable and there's nothing to upload.
Can I exercise in smaller chunks to stay under £1,000?
No. HMRC treats those as linked transactions and adds the consideration together, so the duty is still due and you risk a fine.
Where do I find out about tax after exercise?
See EMI options and tax and Unapproved options and tax.
If you have any questions, our dedicated Customer Success team is here to help: support@vestd.com
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