Good leaver meaning

Leaver provisions and different types of scheme When putting together share plan rules or an option or award agreement, an employer will usually want to spell out what becomes of the relevant option or award if the employee’s employment ends. Any clause addressing this point is commonly called a ‘leaver provision’. For most share incentive arrangements, such leaver terms will be contained in the master plan rules and/or the recipient’s specific award paperwork. By contrast, where the award’s structure makes the individual a shareholder from day one, for example under a growth share arrangement, the leaver mechanics may instead be set out in the company’s articles of association, so as to address any obligation on the employee shareholder to transfer their shares on departure from the company or, as appropriate, the wider group. Where a share award is granted under a statutory tax‑advantaged share scheme, the company must also ensure the scheme’s leaver provisions meet the legislative conditions that apply to that particular type of plan (see: Leaver requirements...

Ordinarily, the statutory framework for company share option plans (CSOPs) does not prescribe the timing or circumstances in which CSOP share options may, or might later, become exercisable, so a company retains discretion when drafting the exercise provisions of its scheme. Accordingly, employers may align the plan’s operation with their commercial objectives. The carve-outs to that general position are that CSOP legislation does stipulate that: the scheme must prevent a qualifying CSOP option from being exercised where the option holder holds a material interest in a relevant company where the scheme allows CSOP options to be exercised on the option holder’s death, the rules must expressly require that those CSOP share options are exercisable for a fixed 12-month period after death. This applies irrespective of any other exercise rule in the plan, other than on a company winding up (and includes any term providing that no exercise is permitted more than ten years after grant) the scheme may allow a qualifying CSOP option to be...

Employee share scheme participants and shareholders This Practice Note considers the matters that arise on the death of a participant in both HMRC tax-advantaged schemes and a range of unapproved share scheme arrangements. It also examines the practical points connected with the death of an employee shareholder who may have obtained shares under those arrangements. Market practice Early Vesting As a matter of market practice, in most employee share plans, death is ordinarily treated as a 'good leaver' event (see Practice Note: Drafting leaver provisions in share plans—Different treatment for different types of leavers). This typically results in accelerated vesting or the ability to exercise awards being triggered. Where that applies, and the relevant scheme is an option plan, the deceased participant’s personal representatives are permitted to exercise options within a defined window (commonly 12 months after death). Likewise, options already vested will generally have to be exercised within a specified timeframe from the date of death, failing which they will lapse and cannot be exercised...

Insert the following as new definitions (if not already included) in the articles of association of the relevant company: Definitions include: Bad Leaver; Good Leaver (loss of subsidiary status, death, Investor‑assessed incapacity, or retirement at normal age); Garden Leave; Employee Trust (s.86 IHTA 1984); Fair Value (Art 1.6); Family Member/Trust; Financing Documents; Independent Expert; Issue Price; Leaver and related terms. Insert the following as a new article in the company’s articles of association: 1 Leavers Applies to Leavers and Leaver’s Shares. Within one year of Leaving Date Investor may require the Company to issue a Sale Notice offering Shares to recipients (including the Company/Employee Trust). The Leaver must complete transfer at the Sale Price within five Business Days. On default the Company may execute and register transfers or cancel its purchase; once effected it is final. Good Leavers receive Fair Value; Bad Leavers the lower of Issue/acquisition price and Fair Value. Fair Value is agreed with Investor Consent within 10 Business Days or determined by an Independent...

Article 12 Insert a new Article 12.7: Despite Articles 12.1 to 12.6, where a person is a Good Leaver, the proportion of their Leaver’s Shares that can be included in a Sale Notice matches the percentage shown against the relevant Leaving Date below. Leaving Date falling... Proportion (%) On or before the first anniversary of the date of adoption of these Articles — 100 After the first but on or before the second anniversary of the date of adoption of these Articles — 80 After the second but on or before the third anniversary of the date of adoption of these Articles — 60 After the third but on or before the fourth anniversary of the date of adoption of these Articles — 40 After the fourth but on or before the fifth anniversary of the date of adoption of these Articles — 20 After the fifth anniversary of the date of adoption of these Articles — Nil ...