Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Employee shareholder definition

What does Employee shareholder mean? Employee shareholder (ESS): In practice, this describes an individual who agrees to hold shares in their employer in exchange for giving up certain statutory employment rights. In Great Britain, the status is defined in the Employment Rights Act 1996 (ss.205A–205K), introduced by the Growth and Infrastructure Act 2013. From 1 September 2013 to 30 November 2016 employers could agree employee shareholder status with staff. New agreements are no longer available, but existing ones continue. An employee shareholder must be given at least £2,000 of shares in the employer (or its parent), free of charge, with a written statement...

Death of employee option holders and shareholders: UK market practice, HMRC CSOP, EMI, SAYE and SIP requirements, tax treatment and practical issues

Published by a LexisNexis Share Incentives expert

Practice notes

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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 thereafter. For many schemes, the exercise window is 12 months from death, as this meets the legislative conditions for tax-advantaged schemes (see: HMRC tax-advantaged schemes below), in accordance with that legislation and requirements. It...

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Karen Cooper

Cooper Cavendish

Karen is an experienced employee benefits lawyer with more than 20 years’ experience in advising companies of all sizes in relation to their employee benefit and remuneration issues. She trained and worked for leading law firms Baker McKenzie LLP and Linklaters LLP and spent three years as a remuneration consultant at Ernst & Young LLP. Prior to co-founding Cooper Cavendish, Karen headed up Osborne Clarke LLP's employee benefit practice for 15 years.Karen is a thought-leader and regularly speaks and presents at industry conferences and events. She is a member of the Small Quoted Companies Alliance Share Scheme Committee and the Share Plan Lawyers Organisation.Karen is also the author of a wide range of legal publications including the chapter on executive remuneration in Sweet & Maxwell’s ‘Corporate Governance’, the chapter on employee share schemes in Jordan’s Company...

Web page updated on 21/05/2026

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