When an employee or executive who has share options or equity leaves a company, employers should exercise particular care on managing their exit. Mishandling the treatment of shares or options – whether through unclear communication, informal promises, or poorly drafted documents – can expose the company to significant legal and financial risk. As illustrated in the recent case referred to below, casual or informal assurances given to employees may amount to binding obligations. It’s therefore critical for employers to handle share-related matters with precision at the point of departure and for any exit documents to be drafted thoughtfully. In the case of Dixon v GlobalData PLC [2025] EWHC 2156 (Ch), the High Court held that the claimant employee was entitled to a remedy based on the doctrine of proprietary estoppel, following an assurance received from his employer that he was entitled to retain and exercise share options even after leaving the company. “Proprietary estoppel” is part of the Law of “Equity”. This is an umbrella term for a number of rights or remedies that have been developed and recognised by the Courts to provide relief in circumstances where it would be “equitable” to do so. A successful claim for “Proprietary estoppel” involves three key elements: A representation, promise, assurance or other encouragement by (in this case, the Company’s CEO) giving rise to an expectation by the recipient (the employee) that he would receive property (shares); A reasonable reliance by the employee upon that assurance; and A Detriment to the employee in consequence of his reliance on it. In this case, Mr Dixon relied on a promise, which was made by the CEO and repeated in a settlement agreement to the effect that his share options would remain in place after termination of his employment and then vest in line with ‘current conditions’ of the share plan. The Claimant relied on this assurance and agreed to extend his employment by three months and accept restrictive covenants. Years later, when the claimant attempted to exercise the options, the company refused, arguing they had actually lapsed on termination as per the original terms and conditions of the share plan. Those rules provided that the company had to formally exercise its discretion to allow for a leaving employee to retain an interest in the shares. The company had not done so one or before the date of his leaving (or at all). The Court found that, although the formal plan rules were not followed, the employer had nevertheless given a clear assurance on which the employee had reasonably relied and it would be unconscionable to go back on it. The Court also rejected the employer’s reliance on a further term of the scheme rules which purported to exclude claims for lapsed options, ruling that it didn’t apply to estoppel-based claims. What does this mean for employers? The case highlights critical lessons for employers around the importance of clear documentation and decision-making in relation to employee share schemes – particularly for leavers and the risks of making promises which are in excess of the employee’s strict contractual entitlement being enforced through “equity” where reliance and detriment are shown. It is always advisable that employers seek legal advice when negotiating exits of senior employees who hold equity and the following should be considered: Before any promises are made, a review of the employee’s equity and shares should be undertaken, including any relevant share plans alongside their service agreement/contract of employment; The mechanism by which an employee will be exiting should be considered and relevant legal advice should be sought; and Any exit documentation, including for example settlement agreements, should be carefully drafted to ensure the agreed position is reflected in the documents. How Morr & Co can help? If you have any questions or would like any further information on the content of this article, please do not hesitate to contact our Employment team on 0333 038 9100 or email info@morrlaw.com and a member of our expert team will get back to you. Disclaimer Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position. Authored by Amber Fraser Solicitor Message Tags Insights Corporate Insights On this page Contact our team today to find out more get in touch
