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This is a hypothetical situation. Suppose person A wants to incorporate a company in the UK, hold all shares, and include the option to issue shares to other people, such as "late co-founder" B or early employee C. Founder A may want to give B and C shares in order to align incentives, or for another reason.

One mechanism in the United States is an option pool:

An option pool is an amount of a startup’s common stock reserved for future issuances to employees, directors, advisors, and consultants. The option pool is created pursuant to a written plan in order to satisfy Rule 701 which provides a registration exemption from Section 5 the 1933 Securities Act.

Via the written plan, a startup pre-authorizes a certain amount of the company’s common stock which will be issued by the plan’s administrator (usually the startup’s board of directors or a committee selected by the board). For example, if the startup has 5,000,000 shares of common stock outstanding, it may elect to authorize 1,000,000 shares to be issued pursuant to the plan.

In this scenario, founder A would keep the option of giving 1 million shares to late co-founder B or early employee C.

The UK's standard articles of association for a company limited by shares don't mention such an option pool.

Does the UK have an equivalent of the US option pool?

  • 2
    Yes, there is a standard way - hire a corporate lawyer to draft it. – Dale M Jan 21 at 20:49

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