Meaning
A contractual period defines the brief duration during which a departing worker must decide whether to purchase their vested equity before it returns to the firm. This option exercise notice window typically runs for ninety days after the individual’s employment or service relationship terminates. It creates a hard boundary for the individual to act or forfeit their earned shares.
Expiry Timeline
The countdown begins automatically on the last day of service and is generally unaffected by vacation or transition periods. For incentive stock options, the ninety-day limit is also a statutory tax rule to preserve favorable tax treatment. If the worker does not submit a signed notice during this period, the option contract is permanently cancelled.
This rule prevents former workers from holding outstanding equity rights indefinitely while contributing nothing to the company’s growth.
Forfeiture Cost
Forfeiting these rights represents a direct financial loss for the worker if the company’s valuation has risen.
Process Step
To exercise the option, the holder must submit a written form and the exercise price in cleared funds before the deadline. The company’s administrator must track these dates precisely because late submissions must be rejected to prevent unfair treatment of other holders.
