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Granting options over existing shares

How to use existing shareholder shares for option grants and manage the process end‑to‑end on Vestd.

While most option schemes create new shares upon exercise, it is also possible to grant options over shares that already belong to a current shareholder. This guide covers everything you need to know about setting up and managing that process on Vestd — from creating the option pool through to exercise.

It is written for everyone involved: company admins, option holders, and shareholders. Each section is clearly signposted so you can go straight to what is relevant to you.

 

Contents

  1. Overview
  2. Why companies choose this approach
  3. How to set up the option pool on Vestd
  4. Granting options to recipients
  5. What happens when options are exercised
  6. Stamp duty — what you need to know
  7. Further reading
  8. Need support?

 

Overview

The most common way to grant options is by authorising a new option pool, which creates new shares upon exercise. However, it is also possible to create an option pool from existing shares — meaning options are granted over shares already held by a current shareholder, rather than newly issued ones.

This approach requires authorisation from the shareholder whose shares will be used.

 

 

Why companies choose this approach

Granting options over existing shares helps protect current shareholders — and prospective investors — from dilution. Instead of authorising an additional 5–10% of shares for an option scheme, companies can draw on existing shares to keep the total share count the same.

This can be particularly useful when:

  • You are preparing for investment and want to keep the cap table clean
  • Existing shareholders want to contribute shares as part of a team incentive plan
  • The company wants to avoid the administrative process of authorising new shares

 

How to set up the option pool on Vestd

Important: Only Vestd staff can create this type of option pool. Please contact support@vestd.com to get started.

 

The setup process follows these steps:

Step 1: Sign the Share Delivery Agreement (SDA)

We will send a Share Delivery Agreement to the admin user (our point of contact for your company). This is a formal agreement between the shareholder supplying the shares and the company granting the options. Once signed, please return the SDA to us.

Step 2: Resolutions

Using the date on the signed SDA, we will prepare bespoke resolutions for the relevant directors and shareholders to sign. We will send you a link to review the details before you click Send for signing.

Step 3: Authorisation confirmed

Once the resolutions have passed, the authorisation is complete and we can create the option pool.

Step 4: Name and configure the pool

We will ask you to name the pool (for example, "[Shareholder Name]'s Option Pool") and confirm how many shares are going into it. A clear name makes it easy to distinguish this pool from others you have on Vestd.

Step 5: Review and confirm

We will attach the signed SDA and resolutions to the pool so all paperwork is stored together, then send you a link to review the final details. When you are satisfied, click Confirm — the shares will then be available to distribute.

 

 

Granting options to recipients

Once your option pool is ready, granting options works in the same way as a standard scheme. For more information, see:

 

What happens when options are exercised

Because the shares belong to an existing shareholder rather than the company, the exercise process works slightly differently from a standard option scheme. The key differences are:

  • A stock transfer is required to move the shares to the option holder
  • The option holder pays the shareholder (not the company) the exercise price
  • Stamp duty may be payable if the total exercise price exceeds £1,000

For more information on stock transfers, see our guide: Stock Transfers Made Simple.

 

 

For the option holder

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 wish to exercise. For a full walkthrough, see our guide on how to exercise options.

Step 2: Pay the shareholder

Once your request is submitted, you must pay the shareholder the total exercise amount directly. Contact the shareholder and the company to arrange payment.

Step 3: Stock transfer form

After payment is confirmed, the company will send a stock transfer form to the current shareholder to sign.

Step 4: Stamp duty (if applicable) I

f the total exercise price exceeds £1,000, stamp duty will be due. See Stamp duty — what you need to know for full details. The company admin will need to upload your proof of stamp duty payment to Vestd before the transfer can be completed.

Step 5: Transfer complete

Once the stock transfer form is signed and any required stamp duty payment confirmation has been uploaded, the shares will be legally transferred to you and you will receive a share certificate.

Please note: You cannot submit multiple exercise requests in quick succession to keep each transaction below £1,000 and avoid stamp duty. HMRC monitors linked transactions and may issue a fine if this is identified.

 

 

For the company and shareholder

Step 1: Receive the exercise request

You will be notified by email when an exercise request comes in. Follow the link in the email, or navigate to Share schemes > All option agreements > Exercise requests. For a full walkthrough, see our guide on how to exercise options.

Step 2: Confirm payment

Before processing the request, confirm that the option holder has paid the shareholder the required amount. Once confirmed, click Process exercise request.

Step 3: Stock transfer form sent

Vestd will send the stock transfer form to the current shareholder for signing.

Step 4: Stamp duty (if applicable)

If the total exercise price exceeds £1,000, the option holder must pay stamp duty to HMRC. The company is responsible for obtaining the proof of payment PDF from the option holder and uploading it to Vestd. The transfer cannot be completed without it.

Step 5: Transfer complete

Once the stock transfer form is signed and any stamp duty receipt has been uploaded, the exercise request will be finalised. Vestd will generate a share certificate for you to sign and issue to the new shareholder.

 

 

Stamp duty – what you need to know

Stamp duty applies when the total exercise price exceeds £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

For step-by-step instructions on making the payment, see our stock transfer guide: How to pay Stamp Duty to HMRC.

 

 

Further reading

For more information on your tax obligations following an exercise, please refer to:



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