The following Share Incentives practice note Produced in partnership with Jenny Wheater of Duane Morris LLP provides comprehensive and up to date legal information covering:
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 defined as a ‘good leaver’ or a ‘bad leaver’.
Typically those leaving for such reasons such as:
a transfer of employment protected by Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), 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 dealing with the treatment of those who leave. The definitions of good and bad leavers can often be defined by the company.
For more information on issues which can be relevant when drafting leaver provisions in share incentive arrangements, see Practice Note: Drafting leaver provisions in share plans.
For information specifically relating to the death of a share scheme participant, see Practice Note: Death of an employee option holder or shareholder.
There are certain statutory provisions impacting who can be treated as a good leaver. These affect participants in tax-favoured HMRC share schemes such as:
save as you earn (SAYE) schemes
share incentive plans (SIPs)
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