Malus and clawback

Produced in partnership with Nick Hipwell of DLA Piper , Sarah Ferguson of Bird & Bird , Rasmus Berglund of Macfarlanes and Sam Taylor of Macfarlanes

Practice notes

Malus and clawback

Produced in partnership with Nick Hipwell of DLA Piper , Sarah Ferguson of Bird & Bird , Rasmus Berglund of Macfarlanes and Sam Taylor of Macfarlanes

Practice notes

The use of Malus and Clawback

The idea that performance-based awards of cash or shares granted to executives and senior employees may be reduced (malus) or repaid (clawback) where a material adverse event occurs or comes to light is now commonplace and established market practice.

While malus and clawback undoubtedly have their roots in the financial services sector, they are now standard features in incentives plans operated by companies listed in the equity shares (commercial companies) category in the UK. This is a direct result of changes to the Financial Reporting Council’s (FRC) UK Corporate Governance Code in 2014 in the wake of the global financial crisis and the subsequent expectations of the UK’s major institutional shareholders. The Department for Business, Energy & Industrial Strategy’s (BEIS) March 2021 consultation to modernise the UK’s audit and corporate governance regime serves as a further reminder that malus and clawback within executive remuneration is an important means of supporting a company’s overall corporate

Nick Hipwell

DLA Piper

Nick Hipwell is a Partner in DLA Piper, based in London. Prior to this, Nick was a Partner in Deloitte’s Reward practice and led the incentive plans legal team, which was made up of a team of lawyers in London and a wider national team. Before joining Deloitte as a Partner in 2011, Nick spent over ten years at Clifford Chance.

Nick has designed, drafted and implemented incentive plans for both listed and unlisted companies, including many which are private equity owned. Nick has implemented plans for both executives and the wider employee population and these plans have related not only to shares and cash but also to other securities, including debt instruments. Nick has particular experience in the implementation of employee share plans globally and has acts acted for some of the world’s largest companies, including members of the FTSE 30, the Euro Stoxx 50 and the Fortune 500, having advised on the implementation of plans in well over 100 countries. A frequent speaker at industry events, Nick has presented on a variety of incentive plan related topics at conferences across Europe and the US.

Sarah Ferguson

Tax Partner, Bird & Bird

Sarah Ferguson is a Partner at Bird & Bird, based in the London office and specialising in incentives.

Her particular focus is advising on the establishment and operation of employee share plans (both in the UK and internationally), including tax-favoured enterprise management incentive (EMI) option plans, long-term incentive plans (LTIPs), tax-advantaged company share option plans (CSOPs), share incentive plans (SIPs) and sharesave (SAYE) plans.

Sarah has almost 15 years' experience of advising both listed and private companies on their executive remuneration and all-employee incentive structures, including the design, implementation and operation of share-based and cash-based plans, their global implementation, related trust and tax work, and support on large cross-border transactions.

Sarah joined Bird & Bird in September 2023, having previously worked at DLA Piper (as a legal director for 3 years), Tapestry Compliance LLP (as a senior associate for over 5 years), Slaughter and May (as a senior associate for two years) and Clifford Chance (for four years, as both a trainee solicitor and then a junior associate). Prior to beginning her legal career, Sarah read Law and Classics at Christ’s College, Cambridge.

Rasmus Berglund

Partner, Tax and Reward, Macfarlanes

Rasmus is a partner in the Macfarlanes Reward practice. With more than 17 years’ experience, he specialises in all aspects of UK and international employee and executive incentive arrangements.

Rasmus’s practice includes the design, implementation and operation of a wide range of employee share plans and executive remuneration arrangements as well as the treatment and negotiation of incentives in the context of corporate transactions.

He advises on all share plan-related matters including individual and corporate tax and structuring, global regulatory compliance, trust and nominee arrangements, plan administration, data protection and employment issues. Rasmus has a particular focus on corporate governance and remuneration disclosure for listed companies and, having spent time on secondment with one the largest UK banks, also advises on UK and European remuneration regulation within the financial services sector.

Rasmus is a member of the Share Plan Lawyers Group and on the Steering Committee of the Employee Share Ownership Plan (ESOP) Centre. He is also qualified as a US Certified Equity Professional (CEP).

Sam Taylor

Associate, Tax and Reward, Macfarlanes

Sam is an Associate in the Macfarlanes Reward team where he works on a broad range of UK and international share plan arrangements with a particular focus on the structure and implementation of both non-qualified and tax-qualified share plans.

His work includes advising on:

the implementation and operation of tax-qualified share plans including CSOP, EMI, SAYE and SIP plans;
the treatment of incentives arrangements in connection with a broad range of corporate transactions (in particular, both private equity and listed company transactions);
the design and structuring of remuneration and management incentive arrangements for both private and public companies; and
advising companies and trustees on the establishment and use of employee benefit trusts in connection with employee incentive arrangements.

Sam is a member of the Share Plan Lawyers Group.

Jurisdiction(s):

United Kingdom

Key definition:

Malus definition

What does Malus mean?

Malus is an additional hurdle to the vesting of a share incentive award under which, if a material adverse event takes place, the company can reduce or extinguish the amount the awardholder may otherwise receive under that award. For further information.

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