Option clauses: one of many forms of securing the parties’ interests in the transaction market

25 July 2023 | Knowledge, News

Option clauses are one of many well-known forms of securing the interests of parties to a contract in the transaction market. Their primary purpose is to provide a ‘simplified’ exit for the investor in the event of a risk of project failure.

The parties to a transaction may also agree that, subject to the implementation of the business plan phase, the project founders will be able to request the repurchase (for example from the investor) of a portion of the shareholding in the share capital of the limited liability company, for a predetermined price.

Nature of option clauses

Option clauses enable one or both parties to the agreement to sell or buy (as the case may be) shares in the future.

The conditions for exercising this option are usually specified in the shareholders’ agreement, along with provisions concerning the price of the shares.

The price may be either a fixed value determined in various ways at the time of drafting the option agreement (including as a flat-rate amount), or it may be calculated at the time of the decision to exercise the option, on the basis of certain ratios or mechanisms described in advance in the agreement.

Deadline for the exercise of the option

Upon expiry of the time limit set by the parties, the option will cease to be exercisable. This means that the option will expire and the parties will be free to dispose of their shares in the company, unless they are bound by other provisions restricting the disposal of the shares covered by the option.

Types of options

Depending on in whose favour the provisions are drafted, options are divided into:

  • Call options – the right to demand the repurchase of the relevant shares subject to the fulfilment of certain conditions within a specified period of time. In such a case, the obligor under the call option will be obliged to sell the shares covered by the option agreement to the obligee (the option holder)
  • Put options – the right of the option holder to require a given shareholder or a third party (the option issuer) to purchase from them a specific block of shares in the company
  • Buy-sell options – a combination of the above clauses, guaranteeing the obligee the possibility of buying from or selling to the obligor, a specified number of shares (at the obligee’s own choice) at a specified time

No detailed regulation of options in Polish law

Polish law does not regulate option clauses.

Therefore, in order to be able to effectively exercise option rights, it is customary in transactional practice to use the forms of security regulated by the Civil Code such as:

  1. A preliminary agreement for the sale or repurchase of shares; or
  2. An irrevocable offer to sell or repurchase shares (depending on the type of option)

Both forms are usually executed on the date of the transaction and, importantly, in writing with a notarised signature.

Summary

Knowledge of option clauses is crucial not only for investors, but also for startup founders negotiating with them, hence the importance of protecting each party to the transaction from the risk of ineffective exercise of the option right.

Questions? Contact us

Patrycja Wakuluk

Source: Rzeczpospolita

Date: 23.06.2023

Latest Knowledge

How to structure a family foundation wisely

One of the key advantages of a family foundation is the flexibility to shape its internal structure as required. The legislature has granted the founders considerable freedom in this respect, enabling the foundation to be adapted to specific financial, family and business needs.

New rules for employing foreigners

The long-awaited Act on the Conditions for the Admissibility of Entrusting Work to Foreigners in the Republic of Poland came into force on 1 June 2025, replacing the previous legislation on employment promotion and labour market institutions.

The UDER2 draft: (theoretically) strengthened principle in dubio pro tributario

This principle, which states that doubts should be resolved in favour of the taxpayer, is set out in Article 2a of the General Tax Code and applies only in cases involving vague regulations. In practice, this leaves the tax authorities with considerable leeway for arbitrary application in proceedings where factual findings are crucial.

The Polish Deposit and Return System: a guide to the legal and tax rules

The Polish Deposit and Return System launches on 1 October. This is a real revolution for businesses, whether they are producers, importers, distributors or traders. Indeed, its implementation brings with it a number of challenges, including, perhaps less obviously, concerning VAT. Here is a brief guide to the most important issues relating to the Polish Deposit and Return System.

Act Amending the Labour Code or Poland’s response to the Equal Pay Directive

On 3 April 2025, a new draft Act Amending the Labour Code appeared on the website of the Sejm. Prepared by the Extraordinary Committee for Codification Amendments, it differs significantly from the original parliamentary draft implementing the Directive (print no. 934), the first reading of which took place on 6 February 2025. On 9 May 2025, the Sejm adopted the bill without amendments.

Contact us:

Rafał Rapala

Rafał Rapala

Attorney-at-law / Partner / Head of Corporate Law and Corporate Litigation / M&A and Private Equity Transactions

+48 608 444 650

r.rapala@kochanski.pl