Employee share schemes—dealing with leavers

Produced in partnership with Jenny Wheater of Duane Morris LLP

Practice notes

In-house

Employee share schemes—dealing with leavers

Produced in partnership with Jenny Wheater of Duane Morris LLP

Practice notes

In-house

What are leavers?

Departing individuals are known generically as ‘leavers’ but the reason behind the departure will usually result in different treatment depending on whether the leaver is considered to be a ‘good leaver’ or a ‘bad leaver’.

Typically those leaving for such reasons such as:

•
redundancy
•
retirement
•
death
•
disability
•
ill health or injury
•
a transfer of employment protected by Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE 2006), SI 2006/246, or
•
the participant leaving because the employer company has ceased to be an associated company of the scheme organiser

will be treated as ‘good leavers’ while those dismissed for any other reason or specifically for poor performance or leaving to join a competitor are treated as ‘bad leavers’.

These are not technical terms but are commonly used in share schemes when dealing with the treatment of those who leave. The definitions of good and bad leavers can often be defined by the company in order to reflect their particular commercial aims.

For more

Jurisdiction(s):

United Kingdom

Key definition:

Good leaver definition

What does Good leaver mean?

Shares may be given to management or employees in order to incentivise them. The purpose of the leaver provision is to deprive management/employees of those shares if they leave the employment of the relevant company or group. The concept of a leaver encompasses not only typical leaving events such as dismissal and resignation but also deemed events such as death, bankruptcy and divorce. If a leaver’s shares are to be sold, the sale price for those shares will vary depending on whether the leaver is a good leaver or a bad leaver.

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