Leavers and share schemes: Employers, document your decisions

16 September 2025 | posted in Employee share schemes

Losing a key employee in contentious circumstances can result in management spending resource in trying to ensure that the exit is properly dealt with and an equitable result is achieved for all parties.  Once the immediate challenge of dealing with an exit negotiation is over, the risk is that the follow-up steps are overlooked, especially with employee share awards.

A recent case had a drastic outcome for the employer, who found itself in the High Court facing a claim for proprietary estoppel to force them to recognise an ex-employee’s right to exercise share options.

In Dixon v GlobalData PLC [2025] EWHC 2156, the issue concerned an executive who had been granted non-qualifying options under the company’s employee share scheme in 2011. In 2014, his employment ended. The chief executive officer of the company verbally agreed that the options would not lapse and that, provided the company met its EBITDA targets, he would be able to exercise them. This was reflected in Mr Dixon’s settlement agreement with the company, which stated:

“The Employee shall retain his entitlement to 44,800 share options in Progressive Digital Media Group PLC’s Share Option Scheme following the termination of his employment.”

In consideration of this, Mr Dixon agreed to extend his employment by three months and accepted restrictive covenants. The court found that Mr Dixon had understood his agreement with the company and had relied on it to his detriment.

Mr Dixon attempted to exercise his options in 2020 and 2022. However, the company refused to honour the options on the grounds that the options had lapsed when his employment terminated.

Despite the CEO’s agreement with Mr Dixon, the board had not been asked to take the steps mandated by the option scheme rules to prevent his options from lapsing. In fact, by the time that Mr Dixon came to exercise his options, so much time had passed that the management team had changed and the company’s records of his options and settlement agreement had been disposed of under the company’s data retention policy.

As is usual, the option plan contained provisions preventing claims for “compensation for the loss of any right or benefit … under the Plan (including, in particular but not by way of limitation, any Options held by him which lapse by reason of his ceasing to be in Relevant Employment)”, which the company sought to rely on in its defence. However, the court held that this provision did not provide protection for failing to honour an agreement to allow a leaver’s options to remain in force.

The court held that the CEO was not empowered to extend the life of Mr Dixon’s options and that the board had not taken the steps to allow the options to continue. This meant that the court could not force the company to allow Mr Dixon to exercise the options.

However, because a promise had been made, which Mr Dixon had reasonably relied on, the court ruled that he was entitled to a remedy in proprietary estoppel.  The precise nature of the remedy is to be determined at a later hearing

The case highlights the importance of seeking advice on dealing with leavers, ensuring that:

• decisions about the treatment of leavers’ share awards are properly documented;
• anyone negotiating with a leaver about the treatment of her or his share awards is empowered to effect the promises being made; and
• the steps needed to carry into effect any decisions are taken.

At Moore SGD Law, we have a wealth of experience in advising companies on dealing with their employee share schemes. Early engagement with us can save the company money and time. Contact us today.