ESOP (Employee Stock Option Plan) is a great way of rewarding and retaining top talent in a startup. Firstly, employees need to note that these are “options” and not “shares”. Options are granted through a letter of offer given by the company to its employee stating that he/she has the “right to purchase shares” of the company in the future at a predetermined price; this price is typically determined at the time of joining the company. However, this “right to purchase” can be exercised only after certain “vesting” criteria is met. For example, if an employee was granted 1000 stock options on joining, after completing one year with the company, he/she will be given the right to purchase 250 shares. As an employee, you may choose to exercise (or purchase) the shares much later (say after 5 years) because of tax implications. Typically, the actual purchase and sale of shares take place when a primary fundraising round is taking place and/or a new investor or your employer is willing to purchase these shares.