Don’t Promise What the Share Plan Doesn’t Allow

The recent High Court case of Dixon v GlobalData PLC [2025] EWHC 2156 (Ch) is a useful reminder for companies dealing with employee share options during exit negotiations.

In this case, the employer had assured the employee that, although his employment was ending, his share options would remain available. The employee relied on that assurance.  However, when he tried to exercise his options some 6 years later, the employer’s parent company claimed the share options had actually lapsed when his employment ended.  This was despite a settlement agreement stating that discretion would be exercised to ensure the options would not lapse.

The High Court found in the employee’s favour.  It held that this employee was able to enforce the contractual commitment made by the employer, even though that commitment sat outside the formal terms of the share scheme. The High Court also decided that the parent company could not rely on a clause within the share scheme designed to prevent claims for compensation for the loss of any benefit under the plan, including options that lapsed on termination (known as a Micklefield clause), on the basis that this clause was not meant to prevent claims based on assurances that an employee’s rights would continue.

This decision probably does not come as a surprise, and it is unlikely that many would argue that this outcome was incorrect. But the case is an important warning.  It shows that where a settlement agreement proposes a result that is different from the default rules in the share scheme, companies need to make sure the position has actually been approved properly.  In particular, companies should ensure that:

1. those responsible for settlement agreement negotiations liaise with the governing body of the share scheme to confirm that it will exercise (or refrain from exercising, as in this case) its discretion as proposed, in advance of making a commitment which is contrary to the default terms of the scheme; and
2. the relevant body or committee formally makes the decisions required to give effect to such commitment, clearly documenting the process conducting in reaching that decision, as well as the outcome.

What this means for employers

If a settlement agreement says that share options will be preserved, extended or otherwise treated differently from the standard rules of the plan, that wording should not be included unless the company is sure it can be honoured.

Employers should make sure that:

• the people negotiating employee exits understand the share plan rules;
• any discretion under the plan is checked in advance with the relevant board, committee or decision-maker;
• any required approvals are formally given before promises are made; and
• the decision and the reasoning behind it are clearly documented.

In practice, the safest approach is to treat share plan wording in settlement agreements as a point requiring separate internal approval, rather than assuming it can be agreed as part of the wider exit package.

If you would like to discuss any aspect of your company’s share scheme in the context of employee terminations or otherwise, please contact Annabel Priest on 01604 609590 or Michael Nadin on 01604 609566.