Long term incentive plan (LTIP) meaning

Fasano v (1) Reckitt Benckiser Group Plc (2) Reckitt Benckiser Health Ltd [2024] EAT 7 What are the practical implications of this judgment? This decision makes plain that EqA 2010, s 109 allows no room for a ‘purposive’ interpretation, even where that leads to the undesirable result that a claimant has no remedy for discriminatory treatment. The EAT affirmed the employment tribunal’s rejection of an indirect age discrimination claim brought by a retired employee who was denied payment under a long-term incentive plan (LTIP) after the employer’s parent company changed the rules to promote staff retention. That said, the EAT found the tribunal’s approach to agency under EqA 2010, s 109 to be perverse and unsustainable. On orthodox common law principles, there was no sound footing for the tribunal’s conclusion that the parent company was acting as the employer’s agent so as to fix the employer with liability...

In this issue: Corporate Governance New content Trackers Useful information Dates for your diary Weekly highlights from other practice areas Corporate Governance LSL Property Services PLC faces investor pushback on executive remuneration At this week’s general meeting, LSL Property Services PLC encountered significant shareholder resistance to its executive pay proposals. More than 35% of votes were lodged against both the suggested amendments to its Directors’ Remuneration Policy and the company’s new long‑term incentive plan (LTIP). Nevertheless, each item still passed, receiving majority backing from those who voted. Under the LTIP, participants will benefit from the company’s value creation over a five‑year performance period. The total award pool is linked to up to 10% of the rise in the company’s equity value, calculated from a baseline share price of £2.78—the average share price in January 2025...

In this issue: Company law and regulatory Corporate Governance Weekly highlights from other practice areas Company law and regulatory FCA Primary Market Bulletin 49—updated review on LTIP reporting Following the Financial Conduct Authority’s (FCA) publication last month of Primary Market Bulletin 49, which assessed how 25 premium listed companies met long-term incentive plan (LTIP) disclosure requirements under the Listing Rules (LR) (see News Analysis: Share Incentives weekly highlights—23 May 2024—Company law and regulatory), the FCA has now released an updated version of its conclusions. While the original note had identified certain LR disclosure shortcomings among some of those issuers, the revised bulletin now records that the FCA ‘established high levels of compliance with the rules’. For instance, the earlier report indicated that only 10 of the 25 companies seeking approval for a new or revised LTIP had issued a shareholder circular under the Listing Rules including either the full LTIP text or a summary of its principal terms; the amended...

What is a long-term incentive plan? As set out in the Practice Note: What is a long-term incentive plan?, the awards most frequently delivered under a long-term incentive plan (LTIP) typically comprise: conditional share awards (often referred to in the US as restricted stock units (RSUs)) nil-cost options share appreciation rights (SARs) forfeitable shares, sometimes described as restricted stock A brief summary outline of the likely capital gains tax (CGT) treatment on disposals of shares obtained on the vesting of each LTIP award type is set out below. For more detail and background on the different award types available under an LTIP, see Practice Note: Structure of a long-term incentive plan—Types of awards for further guidance. Please note that this Practice Note proceeds on the basis that, at acquisition of the shares or otherwise on vesting of the LTIP awards, the employee has been fully subject to income tax and, where the shares are readily convertible, national insurance...

A long-term incentive plan (LTIP) Within listed companies, the term LTIP typically refers to executive share arrangements whereby senior staff receive share-based awards that vest over no less than three years, usually followed by a further two-year holding requirement. For an introduction to LTIPs, see Practice Note: What is a long-term incentive plan? Using LTIPs to drive senior executive performance has become accepted market practice among listed companies. Yet, in July 2016, the Executive Remuneration Working Group—an independent body formed by the Investment Association—issued its final report on the design of executive pay, urging every company to assess whether the conventional LTIP model remained suitable for its business or if it should depart from that approach. In the Working Group’s view, rather than defaulting to an LTIP, companies must identify the structure that best fits their organisation and engage with shareholders to gauge their views on the preferred framework. The emphasis was on careful selection of pay structures and meaningful dialogue with shareholders before settling on any model, rather...

Types of awards An LTIP can deliver a range of award forms, and a single plan may include more than one type. Commonly used awards include: conditional share awards (also known as restricted stock units) share options forfeitable shares (often called restricted shares) stock appreciation rights Conditional share awards (or restricted stock units) A conditional share award, or restricted stock unit (RSU), is a commitment to issue shares once specified service and/or performance requirements are achieved. Recipients typically pay no monetary consideration for the shares; instead, they must satisfy the vesting conditions, after which the vested shares are transferred to the holder without further action... Share options A share option gives the right to purchase company shares at a predetermined exercise price at a future time, usually once service and/or performance criteria are met. Within an LTIP, options are often granted at nil‑cost or at nominal value, meaning the exercise price is set at zero or at...

[ insert name of company who granted the award pursuant to the long term incentive plan (LTIP) ] ( Company ) [ insert name of LTIP ] ( Plan ) Name Quantity of Shares under the Matched Award Grant Date Standard vesting date[, subject to meeting the Performance Targets] End of Holding Period This confirms that you are the holder of a Matched Award conferring the right to acquire up to the maximum number of Shares in [ insert name of Company whose shares are being granted under both invested and where relevant Matched Awards ], as detailed in the table above...

[ insert name of company who granted the option pursuant to the long term incentive plan (LTIP) ] ( Company ) [ insert name of LTIP ] ( Plan ) Name Number of Shares under Option Option Price per Share Date of Grant Normal Vesting date [ , subject to satisfaction of Performance Targets ] End of Holding Period We hereby confirm that you hold an Option permitting you to acquire up to the maximum number of Shares in [ insert name of Company whose shares are being granted under option ] as shown in the table above. The Option was issued on the Date of Grant set out above under a global deed of grant entered into by the Company [ and is conditional upon the Performance Target(s) attached to this certificate ]. The Option Price due per Share when the Option is exercised is likewise specified in the table above...

This declaration of trust is entered into on [ insert date on which this declaration of trust is executed ] by [ insert name of nominee ] of [ insert address of nominee ] [ , a company registered in England and Wales (registered number [ insert company number ]) ] (the Nominee). BACKGROUND (A) On [ insert date on which LTIP Contingent / Matched Award / Option was granted ] (the Date of Grant), [ insert name of Participant ] (the Participant) received a [ Contingent Award OR Matched Award OR Option ] (the Award) over [ insert number and class of shares under award or option ] in the capital of [ insert name of company whose shares are subject to LTIP awards ] (the Company) pursuant to the terms of the [ insert name of LTIP ] (the Plan)...