What is exercising?
In a typical ESOP scheme using call options, the granted options move through three states:
Unvested -> Vested -> Exercised
Exercising is the process of converting your vested options into shares in the company. For more details, see this article.
You can notify your company Administrator of your intention to exercise your options using Orchestra.
How to notify your company of your intention to exercise?
Login to orchestra.
Navigate to your company: Click into the company you have options in.
Select ESOP & options: From your left-side menu.
Click 'Exercise options': on the top right of your screen
Enter number of options: The total number of vested options available to be exercised will be displayed. Enter the number of options you would like to exercise. Orchestra will calculate your exercise amount to pay based on your exercise price.
Confirm: Click 'Confirm' to continue. A summary of your exercise request will pop up.
Send notification: Click 'Confirm' to send the email notification to company Administrators (your email address will be cc'd).
Next steps
Fill out and sign your company's exercise notice: You may nominate a Nominee to take title of your shares (e.g., a family trust).
Pay the exercise price: Into your company's bank account.
Sign a deed of accession: If required, which is a legal document used to get your agreement to become a party to the Shareholders' Agreement.
Once these steps are complete, the company will exercise your options and issue you shares. You will then be a shareholder in the company.
An email notification will be sent from Orchestra to let you know that some of your options have been exercised. You will also receive an email notification when the shares have been issued.
Important notes:
Nominee holders: Some companies may use a Nominee to hold your shares on your behalf to keep their share register compact and reduce the total number of shareholders in the company. While the shares will not be held directly in your name, you will have beneficial ownership. As a beneficial owner, you will be entitled to all the gains and benefits accruing to the shares, and you will decide on the sale or disposition of the shares.
Tax laws: Tax laws vary by country. In New Zealand, ESOP benefits are treated as income, which may affect an employee's student loan deductions, child support payments, or Working for Families entitlements. Make yourself aware of your tax liabilities by consulting with an accountant or tax advisor.
For more information, see: When is a good time to exercise your options?