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Negotiate an equity, share or option arrangement

Equity sounds great. Until the leaver clauses kick in.

Employee equity is one of the most heavily promised and least carefully read parts of a senior offer. The headline number is large; the vesting schedule, leaver provisions, dilution rights, and tax treatment decide whether you ever actually realise it. We model what the equity is worth on each plausible exit, identify the clauses that could take it away, and negotiate the terms that protect your upside.

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What does negotiating an equity arrangement involve and why does it matter?

An employee share scheme (ESS) or option plan is governed by the rules of the plan itself, the employment contract, and the tax framework in Division 83A of the Income Tax Assessment Act 1997 (Cth). The key economic terms are the vesting schedule (when shares or options become yours), the leaver provisions (what happens to vested and unvested equity when you leave, by category of leaver), the strike or issue price, the dilution and pre-emption rights, and the tax point. Plan rules drafted for the employer’s convenience routinely treat all departures as “bad leaver” forfeitures unless the employee negotiates otherwise.

What is the difference between shares, options, and a performance rights plan?

Shares are direct ownership in the company, conferring voting and dividend rights once they vest. Options are the right to buy shares at a set price (the strike price) for a defined period, usually after a vesting condition is satisfied. Performance rights are rights to receive shares conditional on hitting specific performance hurdles. Each is taxed differently under Division 83A of the Income Tax Assessment Act 1997 (Cth) depending on when the tax point arises.

What does "vesting" mean and how does it work?

Vesting is the schedule by which the equity moves from being conditional to being yours. A typical schedule is four years with a one-year cliff: 25% vests at the end of year one, then monthly or quarterly through years two to four. Until equity vests, it can be forfeited if you leave; once vested, it depends on the leaver category whether you keep it.

What are good-leaver and bad-leaver provisions?

Plan rules typically divide departures into “good leaver” (retirement, redundancy, death, disability, sometimes mutual exit) and “bad leaver” (resignation, dismissal for cause). Good leavers usually keep vested equity and may accelerate some unvested; bad leavers usually forfeit all unvested equity and may be forced to sell vested equity back at a price below market. Where you sit affects the value of the equity by an order of magnitude.

What is the tax point on employee equity?

Division 83A of the Income Tax Assessment Act 1997 (Cth) sets out when employee equity is taxed. For start-up concession schemes, tax can be deferred until disposal; for non-concession schemes, the default tax point is usually vesting. Tax planning around the timing of the tax point is one of the highest-impact negotiations in an equity arrangement, and we work with your accountant to get it right.

Equity modelled, not just described.

We calculate what you walk away with on each plausible exit.

Leaver category locked in.

Good-leaver treatment negotiated up front, not argued about later.

Tax point optimised.

Division 83A timing structured for the deferral or concession that actually fits you.

Got an equity offer? Run the numbers before you sign.

Equity values look enormous on the page and shrink dramatically once the leaver clauses and tax timing are factored in. The first call gives you a real number.
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They offered you equity. The fine print decides if it is worth anything.

You have been offered shares, options or performance rights as part of a senior role, the headline number sounds significant, and the plan rules are dense enough that you cannot tell whether you are getting actual value or a marketing line. The leaver provisions, vesting cliffs and tax timing decide what you actually realise.
  • We will read the plan rules, the offer letter, and the employment contract together.
  • We will model the equity value on each plausible exit (resignation, redundancy, dismissal, sale of the company).
  • We will negotiate good-leaver treatment so a mutual exit does not forfeit vested equity.
  • We will structure the tax point under Division 83A for the most favourable treatment available.
  • We will draft any side letter or plan rule amendments that document the negotiated position.
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Negotiate an equity, share or option arrangement

A senior offer landed, and the equity component is the headline.

You have been offered a role where a meaningful part of the package is equity, on a four-year vest with the standard one-year cliff. The plan rules cover thirty pages and mention “bad leaver” without defining it precisely; the offer letter describes the headline value at today’s share price, not the price after a series-B raise. You want to take the role, you want the equity to actually be worth something, and you do not want to learn the leaver definitions the hard way on exit.
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What's included in your equity negotiation service

  • Review of plan rules, offer letter, and employment contract.
  • Modelling of vested and realised equity across plausible exit scenarios.
  • Negotiation of leaver category definitions and acceleration provisions.
  • Tax point structuring under Division 83A of the Income Tax Assessment Act.
  • Coordination with your accountant on the tax treatment.
  • Side letter or plan rule amendments documenting the negotiated terms.

What employees discover when equity reaches the exit.

The most common discovery employees make about their equity is at the wrong time: the point of exit. A founder who has been offered the right to resign by mutual agreement finds out that “mutual” is not in the bad-leaver definition. An option-holder whose company has tripled in value finds the strike price plus the tax point at vesting means they cannot afford to exercise. A senior hire whose company is acquired finds that the change-of-control clause does not accelerate the unvested tranche. None of this is recoverable on the way out. It is set in the documents that were signed on the way in.
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Here is how we get the equity to actually pay.

We start with what the equity is supposed to be worth in the recruiter’s pitch and work backwards to what the documents actually deliver. The plan rules get read against the leaver definitions, the vesting acceleration clauses, and the tax point. We model the realised equity across exit scenarios and identify the gaps. From there we negotiate the changes: a sharper leaver definition, an acceleration trigger on change of control, a tax point that defers under the start-up concession or aligns with disposal. By the time the offer is signed, the equity component is documented in a way that actually matches the offer letter.
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Three steps to equity that actually delivers.

Model, negotiate, secure.

1

Plan modelled.

We read the plan rules, employment contract and offer together, and model the equity value across the realistic exit scenarios.

2

Vesting protected.

We negotiate the leaver category, acceleration triggers, and tax timing so the equity reflects the deal you were offered.

3

Equity secured.

We sign you off on the plan, side letters and the contract, with the negotiated position properly documented.

Employment lawyers who negotiate equity, options and performance rights for senior employees.

Equity is the part of a senior package that most often disappoints, and almost always because the documents were signed before they were modelled. We have negotiated equity arrangements across founders, executives, senior technical hires and early-stage employees, working alongside accountants on the tax treatment and corporate lawyers on the plan rules. Our team models the value, negotiates the leaver provisions, and structures the tax point so the equity component delivers what it was offered as. You sign a plan that is worth what the recruiter said it was.

We understand you want to know the cost, before we get started...

We will map out our process, from beginning to end, so you know what the journey will look like before you get started.

We will provide you with a clear and detailed Work Proposal covering each step along the way.

Our fair fees are all-inclusive. No hidden costs for telephone calls, emails, photocopying, couriers, or coffee.

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Get the equity properly modelled before you sign.

1300 882 386
wehelp@jfmlaw.com.au

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