What Happens to My ESOP if I Leave the Company?

Modified on Wed, 6 Aug at 9:17 AM

Leaving your job, whether by choice or not, can have a big impact on your ESOPs or stock options. Whether you are resigning, getting laid off, or even retiring, it is important to know what happens to your equity and what decisions you have to make.

1. Vested vs. Unvested Shares

The first thing to understand is the type of equity you hold — specifically, the difference between vested and unvested shares.

Vested shares are yours. You’ve earned them by staying with the company long enough or meeting specific performance conditions.
Unvested shares, on the other hand, are not yet yours. If you leave the company before they vest, you’ll typically forfeit them.

This is why companies use equity as a tool to encourage long-term commitment — it’s designed to reward loyalty and retention over time.

2. What Can You Do With Vested Options?

If your ESOP is structured as stock options, leaving the company normally triggers a countdown, where you must exercise your vested options before a deadline. This is commonly known as the post-termination exercise window (PTEW).

Some terms that you must note:

Most companies give you 90 days from your last working day to exercise your vested options.
Some companies offer shorter windows (e.g. 30 days), while others — especially in the U.S. or in well-funded startups — may extend this to 6 months, 12 months, or even longer.
If you don’t act within that time frame, you lose all unexercised vested options, even though you had already earned them.

Many employees don’t realize they need to take action until it’s too late — and by then, their options have expired.

Do I have to pay to exercise?

Yes. When you exercise your stock options:

You pay the strike price × number of vested options.
Example: If your strike price is $1 and you have 10,000 vested options, you’d pay $10,000 to receive 10,000 shares.

You may also incur tax obligations depending on where you live, even if you don’t sell the shares immediately.

3. RSUs or Direct Stock Grants

If you were given Restricted Stock Units (RSUs) instead of stock options, you don’t need to pay anything to exercise. But you’ll only keep what’s already vested — the rest is cancelled.

In some rare cases, companies may accelerate RSU vesting upon exit, but this depends on the equity plan and employment contract.

4. What If You’re Laid Off or Terminated?

The rules are usually the same, but some companies offer extended vesting or longer exercise periods as part of exit packages — especially in layoffs.

All in all, if you are planning to leave or have been let go, don’t wait, as your stock options might expire quickly.