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 Extending Post-Termination Exercise Window

Kelvin Ong's profile image
Kelvin Ong posted 10-03-2023 01:14

Hey everyone,

Does anyone have expertise or experience on extending the Post-Termination Exercise Window?

I'm especially interested in the tax implications for both optionee and the company for extending this window. I know that the normal window is set at 90 days due to tax implications that apply specifically to ISO optionees. I think but am unsure that NSO optionees don't have these tax implications, which would make extending their exercise window a lower-effort endeavor for the company (assuming we accept these options return to the option pool later).

I know this doesn't replace legal or tax advice, but wanted to do an early check to bolster my own background knowledge before I seek counsel.

Valentin Haarscher's profile image
Valentin Haarscher

Hey Kelvin, 

You got it right, tax implications relate to ISO treatment, but for NSO as far as I am aware there are no direct tax implications unless the NSO are granted to someone in a country where there's a tax-favored scheme that has similar requirements as ISO (e.g. NSO qualifying as EMI in the UK), but that's very uncommon. 

The main disadvantage as you state is that options take longer to go back to the pool. To mitigate that, what we see in a few companies is what we call "variable post termination exercise period", i.e. after a certain number of months/years of tenure employees get a longer post termination exercise period. 

Hope this helps a bit.