Bad Leaver After Dismissal: EMI Options, RSUs and Unvested Shares
This article is for you if:
dismissal or resignation has triggered a “bad leaver” label;
vested options, RSUs, growth shares or founder shares may lapse or transfer; or
a settlement offer promises equity treatment without naming the grants or deadlines.
“Good leaver” and “bad leaver” are contractual labels, not universal legal definitions. One plan may reserve bad-leaver status for fraud; another may include any resignation. You can also be a good leaver under an option plan but a compulsory transferor under the company’s articles.
Separate every right
Do not describe everything as “my equity”. Build a grant-by-grant tracker:
Instrument | Document that usually controls | Exit question |
|---|---|---|
EMI or unapproved option | Plan rules and grant agreement | Does it lapse, accelerate or remain exercisable? |
RSU or LTIP award | Award terms and plan | Is vesting time-based, performance-based or exit-only? |
Actual shares | Articles and shareholders’ agreement | Is transfer compulsory, and at what value? |
Deferred cash linked to shares | Remuneration terms | Is it cash, securities or both for tax purposes? |
Also collect the service agreement, termination letter, cap table, board minutes and settlement draft. Record grant date, number, exercise price, vesting, leaver definition, decision-maker, exercise deadline, valuation method and tax status.
Caira can help you upload plan rules, option agreements, articles and a cap-table spreadsheet, then expose inconsistent definitions and missing dates.
EMI does not guarantee good-leaver treatment
EMI is a tax-advantaged option framework. It does not promise that an option survives dismissal. The current GOV.UK EMI overview explains qualification and exercise rules; the contract decides the leaver outcome. HMRC guidance also recognises schemes in which the board decides good-leaver status, but tax acceptance of that structure does not prove the board used its power correctly.
A CTO has 40,000 EMI options, half time-vested. Redundancy is a good-leaver event, but the plan allows only 90 days to exercise. The favourable label is worthless if the notice, price and payment miss the deadline.
A founder-MD owns growth shares and holds separate options. Dismissal triggers compulsory transfer of the shares under the shareholders’ agreement, while the options lapse under their plan. Different documents, processes and valuations apply.
An executive resigns after a sale is announced but before completion. An exit-only award may not yet be exercisable. The result depends on the exit date, continued-employment condition, board acceleration power and any precise promise in the settlement agreement.
Check the decision—and the value
In Dixon v GlobalData plc, the High Court examined post-termination option communications and internal records. It is a useful warning: preserve the exact written promise, plan version and administrative tracker. It does not mean an informal email always overrides the agreement.
Where directors classify a leaver, record the meeting, quorum, conflicts, evidence and reason. If decision-makers may acquire forfeited shares cheaply, compare the articles, the plan and directors’ duties in sections 170–177 of the Companies Act 2006. An unfair-prejudice petition under section 994 is not a general appeal from every harsh exit; it concerns unfairly prejudicial conduct of the company’s affairs affecting a member.
Private-company value is not simply the latest fundraising price multiplied by your percentage. Debt, preference waterfalls, dilution, minority discounts and class rights can change the result. Caira can translate the cross-document position into plain English and help draft specific questions about classification, authority, deadline and valuation.
A settlement should identify each grant, number, vested amount, leaver status, exercise deadline, price, required approval, withholding and treatment on a sale. “Equity will be dealt with under the plan” may settle nothing.
Questions people hesitate to ask
If options are vested, do I already own shares?
Usually no. A vested option may only be exercisable; ownership normally follows valid exercise and issue or transfer of the shares.
Can Companies House confirm my options?
No. Its public records do not provide a definitive option register or cap table.
Can the board invent a new bad-leaver reason after I leave?
Not merely by applying a label. Check the plan version, existing discretion, amendment power, consent requirements and notice of any change.
Caira offers a 14-day free trial, then plans from about £15 a month.
This article is general information, not legal, financial, tax or medical advice.
