On this page
# Seven Costly Mistakes People Make Selling ESOPs
ESOP value is rarely destroyed by markets. It is destroyed by process — windows that lapse, taxes nobody budgeted, deals done on chat threads. Here are the seven mistakes we see most, roughly in the order they occur in the ESOP journey.
1. Letting the exercise window lapse
Vested options usually survive resignation only for a short window — often 30 to 90 days — after which they lapse permanently. People discover this mid-notice-period, cannot fund the exercise cost plus tax in time, and forfeit years of vesting. Fix: read the window in your grant letter *before* resigning, and treat exercise funding as part of your exit plan.
2. Ignoring perquisite tax at exercise
Exercise is a taxable event: the gap between fair market value and your exercise price is taxed as salary, immediately, in cash — before any sale proceeds exist. The bill can exceed the exercise cost itself. Fix: compute both numbers before exercising; if your employer is a DPIIT-recognised startup, ask about the deferral. Details in tax on selling unlisted shares — general information, not tax advice; confirm with your CA.
3. Skipping the company's transfer process
Private limited companies typically have **ROFR and approval requirements in their articles; ESOP schemes can add conditions of their own. Sellers who agree a price first and check the process later watch deals die in paperwork — or discover an existing shareholder takes the deal at their negotiated price. Fix:** confirm the transfer process *before* agreeing terms. The steps are in the transfer process guide.
4. Doing the deal informally
A price agreed on WhatsApp, shares transferred on trust, payment "by the weekend." The gap between the share leg and the money leg is exactly where informal deals fail, and without an agreement there is little recourse. Fix: a written purchase agreement plus a settlement sequence where payment is secured before shares move — escrow, or a platform flow that verifies the transfer before releasing funds.
5. Selling everything at once
One large block is harder to place than three smaller ones — size clears at deeper discounts — and stacking the whole gain into a single financial year can worsen the tax position. Fix: consider tranches. How block size affects your price covers the mechanics.
6. Keeping no records
Grant letter, vesting schedule, exercise letter, the FMV used at exercise (your cost basis), the purchase agreement, transfer confirmations. Sellers who cannot produce these face slower verification at sale time and a reconstruction exercise at return-filing time. Fix: one folder, kept current — the full list is in documents needed to sell unlisted shares.
7. Anchoring on the headline valuation
The last round priced preference shares in a fundraising negotiation; a secondary buyer of your equity shares prices illiquidity, block size, and share class. Sellers anchored to the headline number reject workable offers, wait, and often meet a worse market later. Fix: value against recent secondary prints, not press releases — and treat anyone quoting you a post-IPO price as a warning sign.
The pattern
Every mistake above is avoidable *before* the sale starts and expensive after. Ten minutes with your grant letter, a records folder, and the end-to-end selling guide prevents most of them — and Polemarch's ESOP desk puts the agreement, approvals, and settlement sequencing on rails.
Ready to sell? Start with one request
If you hold unlisted shares, pre-IPO stock, or vested ESOPs, Polemarch's sell desk gives you three routes from a single submission: a direct purchase offer from Polemarch itself (the Polemarch Guarantee — the guarantee is that Polemarch is the buyer, not a promise about price or return), an assisted sale worked through our buyer network, or a waitlist entry that alerts us the moment matching demand appears. Submit the company, quantity, and your price expectation at /dashboard/sell — you see the offer before you commit to anything, and once a transfer is verified, payment settles to your bank within T+2 working days.
*Published by the Polemarch editorial team. Educational only — not investment, legal, or tax advice.*