This page is no substitute for legal advice but some matters to bear in mind are:
In many cases it is very important to seek to stay at work, in place and without any announcement being made about your departure. This note isn’t a substitute for advice on this point but we have raise it in order to give early notice of the importance of this point. Sometimes executives agree heads of terms and then allow the company to make internal and external announcements of the fact that the executive has left or will leave. This can remove a lot of negotiating strength and force your hand to accept whatever terms are offered. In general terms we see it as better to stay at work while the negotiations continue and certainly not to allow the company to make an announcement. In fact, if you are agreeing the heads of your departure ensure that the company knows that under no circumstances can it make any announcement of your departure until the termination or compromise agreement is signed. The same point about not making an announcement goes for you as well: - don’t tell anyone, not even close colleagues or friends at work that you are leaving until the ink is dry on the agreement. So to repeat ourselves: your negotiating position is usually always highest when you are in the office doing your day to day work while no one knows. Clearly, sometimes you can’t affect this but in the majority of negotiated executive departures the company will want to do a deal quickly if you are in place and still working and this works in your favour.
Furthermore, if you are a director of a stock market listed company the company will need to act quickly as it is almost certain that your departure will be a notifiable event. As such, getting quality employment law advice quickly will work in your favour.
Share Options, Share Option Rules and Termination of Employment
There are many scheme variations. You need to be aware of them as soon as possible. Issues include when options vest, when vested when they have to be exercised by, what happens on termination to a) vested but unexercised options and b) unvested options. Do not rely on the letters of grant or even explanatory leaflets given out by the company. We have experience of these being wrong. Think about getting a copy of the scheme rules for each of the option grants you have. Talk to us about these issues as soon as possible. We may ask for copies of the grant letters and scheme rules and we have a lot of experience of deals being delayed for a considerable period because the executive hasn’t got copies of any of the scheme rules. The same issues apply to restricted shares.
In respect of share options etc. we are normally interested in the ‘good leaver’ and ‘bad leaver’ provisions. Some schemes don’t have such provisions, others limit ‘good leavers’ to death or retirement or ill heath. Others include redundancy or in American schemes ‘termination without cause’. We even saw one which claimed options lapsed if the executive was guilty of ‘egregious or unnatural behaviour’. In smaller companies without specific option scheme rules relevant details are often found in the Articles of Association and/or Memoranda. We have a lot of experience of dealing with claims in respect of shares under the ‘unfair prejudice’ rule and such like.
If you are facing dismissal you will be naturally thinking about getting another job. This note concerns the compromise or settlement agreement that you may end up signing with your employer or ex employer. In our experience roughly 50% of settlement agreements have a clause in it saying that you ‘warrant’ that you have not got another job or any offer for any position that will bring in any form of income and that you have no immediate expectation of getting such an offer. It is a reasonable clause for a company to impose as no company wants to give departing employee lots of money on the basis that they are going to be unemployed for some time only to find that they start a new job immediately afterwards. This note therefore serves as a warning. You might be required to sign such a warranty and if you do and are found to have breached it you probably won’t get the money. Our advice is that under no circumstance should you put yourself in the position of having breached a warranty. Under this firm's 'resources' seciton there is an article entitled 'some issues with compromise agreements' - it contains more information.