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by Undo Capital
December 15, 2025
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What Is an Option Agreement?

An option agreement is a legal contract that sets out the terms under which a person is granted the right to acquire shares in a company at a future date.

Option Agreement Meaning

The option agreement meaning centres on defining how, when and at what price share options can be exercised. To define option agreement in practice, it covers the exercise price, vesting schedule, leaver provisions, expiry date and any performance or exit conditions. A clear option agreement definition is essential for both the company and the option holder, as it governs rights, tax treatment and what happens if employment ends. Option agreements are commonly used in EMI, CSOP and growth share structures to align long-term incentives with company success.

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Disclosure Notice: This communication is issued by Undo Capital Limited (“Undo Capital”) and is provided strictly for informational purposes only. It contains general information and should not be relied upon as accounting, business, financial, investment, legal, tax, or other professional advice. Undo Capital is not regulated by the Financial Conduct Authority (FCA) and does not provide investment, financial, or tax advice. Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. Nothing in this communication constitutes, or should be construed as, a recommendation, offer, or solicitation to purchase or sell any security or financial instrument.
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Disclaimer: Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. We do not provide investment advice, financial advice, or tax advice, nor are we regulated by the Financial Conduct Authority (FCA). Participating in startups and early-stage enterprises carries inherent risks, including limited liquidity, absence of dividends, potential loss of investment, and dilution. Any decisions regarding investments should be made independently by the investor as part of a well-diversified portfolio.