Share Options – Loose wording or missing governance can bite

Following on from our blog last year on the Andrew Dixon v Globaldata PLC 2025 case (Effective Recordkeeping for share plans is vital) the High Court has since been asked to opine on the level of the compensation due to the former employee who had been denied a promised entitlement to exercise share options after he left employment.

In brief, Mr Dixon was granted options in three tranches, each of which were subject to performance conditions. The first tranche of options were exercisable while Mr Dixon remained employed.  Tranches 2 and 3 were subject to performance conditions that were only met after Mr Dixon ceased employment.  However, Mr Dixon was promised that he would be able to exercise those Tranches after his employment ceased, and the High Court agreed.

As the parties had not at trial specifically addressed the remedy which might be awarded in the event that the former employee succeeded, a separate hearing took place.  This part of the case focused on two particular issues: the valuation of the “Tranche 2” options and whether the “Tranche 3” options were entitled to equitable compensation.

Valuation of Tranche 2 options

The former employee argued that he should be entitled to the market price of the defendant company’s shares on the date he was refused the opportunity to exercise his shares (which was a higher value than would have been the case had the shares been sold on the date when those rights generally became exercisable).

However, the High Court did not agree with him and decided that the former employee should be compensated on the basis of a price used for other option holders who had elected to exercise and sell their options in fact at a lower price.

The Court was clearly following the equitable principle that the claimant (i.e. the former employee) should not be placed in a more advantageous position than the other option holders as a result of what had happened.

Compensation for Tranche 3 options

Unsurprisingly, the High Court held that it would be unconscionable to exclude the former employee from a remedy in this regard even though “Tranche 3” options were effectively replacement options (the original performance targets had been revised because of the impact of Covid) and had not technically been granted to the claimant as he was no longer employed.

Conclusion

Essentially we consider this to be a commonsensical result.  However, the overall message from Dixon v GlobalData PLC (across both hearings) is practical rather than technical: if you agree a leaver’s equity treatment as part of exit negotiations, you should record it clearly and ensure it is implemented through the plan’s required decision-making process. Loose wording or missing governance can turn a “commercial understanding” into years of litigation about valuation, timing, and remedy.

RM2’s team has years of experience handling share plan arrangements for our clients, including designing and managing arrangements for leavers that balance fairness with commerciality.  If you have questions about your current share plan arrangements, or are considering reviewing and updating your employee equity incentives programme, please get in touch with us on enquiries@rm2.co.uk and one of our expert advisers will be happy to speak with you.