Employee Stock Option Plans (ESOP) in Singapore

Good leaver/bad leaver clauses

It is good practice for Companies to use leaver clauses to define what will happen to participants of the ESOPs equity when they leave the business. Typically, Good leavers will keep hold of their vested share options after they leave, whereas bad leavers lose their right to retain any equity, even the options that have vested.

Below is a list of the most common examples of good leavers:

• Retirement;
• Serious illness or death (in which circumstance the employee’s share options would transfer to the next of kin);
• Being made redundant through no fault of their own, e.g., as a result of a merger or because the role is no longer necessary.

Whereas bad leavers typically include employees who:

• Commit gross misconduct;
• Are convicted of a crime, such as committing fraud or embezzlement;
• Break a noncompete clause or violate the terms of a shareholders’ agreement;
• Voluntarily resign before reaching a particular milestone, e.g., before all their shares have fully vested.