The following Share Incentives practice note Produced in partnership with Dan Sharman of Osborne Clarke and Michael Carter of Osborne Clarke provides comprehensive and up to date legal information covering:
A performance condition is a pre-set condition which must be satisfied before the award holder is able to benefit from the option or award, and is therefore most often linked to the vesting of the award or the exercisability of the option (as applicable).
Performance conditions can relate to anything, but commonly relate to:
the performance of the company as a whole
the performance of part of the company or a certain business of the company (ie the business in which the employee is employed in)
the individual performance of the particular employee award holder, and/or
the performance of a particular team (project team or more permanent team)
Performance conditions can be absolute or relative. For example, conditions which are linked to corporate performance can be absolute (in reference to the company itself) or relative (comparing the performance of the company with a group of similar companies or a financial index such as the FTSE 100).
For further details on performance conditions, included why they are needed and how they should be drafted, see Practice Note: Using performance conditions in employee incentive plans.
There are certain circumstances where a company may consider it necessary to waive or amend the performance conditions of share options/awards which have already been granted. Examples of this are where:
there has been an economic downturn
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