An investment firm entered into agreements with the controlling shareholders of a number of private companies under which it was granted options in the private companies. After the activity of the private companies was transferred to a corporation which IPOed on the London Stock Exchange, the investment firm sought to exercise the options, but the controlling shareholders refused such exercise, inter alia, because the consideration for the options was not transferred on time.
The Court held that the controlling shareholders are required to compensate the investment firm for the options that were not exercised. When exercising options, the exercising party must comply with the conditions of exercise as agreed between the parties. If such requirements are not met, the options expire. When the exercise of options requires an exercise notice which must be received by the company prior to the transfer of consideration for the aforementioned options, then the obligations must be seen as combined obligations which the parties are required to fulfill simultaneously. As such, a party to the agreement may delay the obligation imposed on it until the other party shows at least a willingness to fulfill the opposite obligations. Here, after the investment firm sent the exercise notice, the controlling shareholders did not show any willingness to transfer the shares and even explicitly announced that they do not intend to do so. Under such circumstances, the investment firm was entitled to delay the payment without invalidating the options and the shareholders are required to compensate the investment firm for not granting the options.