What Happens To Share Awards When Employees Leave?

There is a growing trend amongst employers towards rewarding key employees with share-based remuneration in place of cash bonuses. Issues can arise when a worker in receipt of these benefits leaves and employers need to consider how to deal with the employee's share awards or share options. We examine these issues and explore the importance of including Micklefield Clauses in equity incentive plan documents.

Equity Incentive Plans ("EIP"s) often provide that, where an individual's employment is terminated, the unvested shares or share options are lost. These plans will contain a 'Micklefield Clause' which protects the company from any liability arising as a result of loss of an employee's unvested shares or options caused by the termination of the employment.