Micklefield clauses
Produced in partnership with Sam Whitaker of Shearman and Sterling LLP
Micklefield clauses

The following Share Incentives guidance note Produced in partnership with Sam Whitaker of Shearman and Sterling LLP provides comprehensive and up to date legal information covering:

  • Micklefield clauses
  • What is a Micklefield clause?
  • Relevant case law
  • In relation to what claims will a Micklefield clause be effective?
  • Issues under the Consumer Rights Act 2015 (CRA 2015)
  • Micklefield clauses and employee shareholder status shares
  • Drafting a Micklefield clause in practice

What is a Micklefield clause?

It is common for employee share plans to provide that, on termination of employment (or when an employee is given or receives notice of termination of employment), subsisting share awards will be forfeited and subsisting share options will lapse.

It is also now common for employee share plans (and sometimes also employment contracts) to contain clauses which effectively provide that the employee waives any claims he may have to compensation for the loss of such share awards on the termination of employment. Such clauses are known as ‘Micklefield clauses’ after the leading case on the effectiveness of such clauses, Micklefield v SAC Technology Limited. Increasingly, such clauses are also drafted so as to try to exclude any claims that an employee might seek to bring for an alleged unlawful exercise of discretions by the company under the employee share plan.

From the employer’s perspective, the purpose of such Micklefield clauses is to:

  1. ensure that issues relating to the treatment of share incentives on termination of employment are, so far as possible, dealt with solely by the terms of the share plan itself

  2. prevent the employee from being able to pursue a ‘back-door’ employment claim for compensation for the loss of such share incentives under the employment agreement, when he would be prevented from pursuing a ‘front-door’