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The Little Book of Senior Executives Appointments and Agreements
Ok, you can have a company car, just get it out of here!
Welcome 2 Negotiating a New Service Agreement (Including Bonus and Equity Interests) 4 Restrictive Covenants What are Your Obligations? 8 10 Financial Services – Senior Managers and Certification Regime 14 Expatriate Senior Executives About the Team 16 18
Welcome Moving to a new role is a stressful time and it’s vital to make sure you get the right terms in place – and to limit the risk of disputes with your previous employer. This Little Book guides you through the process and focuses on the key legal and practical issues for Senior Executives moving to a new role. It features the work of talented illustrator, David Orme. Very best wishes The Team at CM Murray LLP info@cm-murray.com | +44 (0) 207 933 9133 This booklet is only a brief overview of relevant English employment law and is for general purposes only. Specific legal advice should be taken on particular circumstances – please do contact us and we would be pleased to help you. Information is correct as of January 2021. 2
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Are you sure this will make me a good leaver? 4
Negotiating a New Service Agreement (Including Bonus and Equity Interests) Contractual Terms You should receive full written terms (including underlying plan rules) when a job offer is made to you (and before you resign from any existing role). Key Issues to Consider and Negotiate, where Possible, will Include the Following: • Probationary period (and related notice period) • Length of notice period and any PILON clause 5
• Narrow contractual grounds for summary termination • Extent and duration of any garden leave provision • Post termination restrictive covenants (and possible carve outs) • Good leaver/bad leaver provisions (and related forfeiture provisions) on bonus, share and other LTIP entitlements • Sign on bonus and/or buy out of any forfeited deferred compensation from former employer • Benefits, including private medical, life insurance, permanent health insurance and holiday sick pay entitlements • Pension arrangements 6
A Job Offer is Usually Subject to the Following:- • Satisfactory references • Applicable immigration consent • Not acting in breach of existing contractual obligations • Relevant regulatory approvals, and other background checks including, for some roles, criminal record checks The job offer may be withdrawn (or the employment terminated summarily) if any of these preconditions are not met. Do not resign from your current role until the new contract is signed and all preconditions have been confirmed as satisfied. 7
Restrictive Covenants Consider any existing restrictive covenants with your current employer. These will restrict your competitive activities on leaving the employer. The restrictions must be appropriately drafted at the time they are entered into and limited in time and scope. Restrictions tend to include the following:- • Non-competition • Non-solicitation and non-dealing with clients (sometimes including prospective clients and intermediaries) • Non-solicitation and non-dealing with key colleagues • Non-interference with suppliers 8
The risk in breaching restrictive covenants can include e.g. an injunction or a related damages claim. Claims can also be brought against your new employer for procuring a breach of contract If your new employer is keen for you to start in spite of your covenants, consider requesting an indemnity in relation to any litigation. Do you like your leaving gift? This is a tracking device, isn’t it? 9
What are Your Obligations? Contractual Duties Express Duties Your employment contract will include express obligations e.g. the duty to devote your whole time and attention to the role. Implied Duties You will also be subject to certain implied duties e.g. the implied duty of good faith and fidelity to act in accordance with the interests of the company. 10
Fiduciary Duties Senior executives, in many cases, will also owe so-called fiduciary duties, including the duty always to act in the best interests of the company (even if this is in conflict with your own interests). Executives considering leaving their employer for a competitor company, either alone or with a team, should bear in mind their express and implied duties to their employer and seek advice early. 11
Director Duties Employees who are statutory directors of the company owe further duties to the company under the Companies Act 2006. Directors’ and Officers’ liability insurance provides cover in respect of these additional duties (fraud, wilful misconduct or gross negligence are usually not covered). You should ask to see a copy of the insurance policy to check you are happy with its terms. An indemnity may also be provided by the employer to cover claims brought against statutory directors in certain circumstances. 12
Regulatory Duties Executives in certain industries, typically in Financial Services, will be subject to additional regulatory duties and obligations and oversight by one or more regulator(s). 13
Financial Services – Senior Managers and Certification Regime Senior Managers Regime The senior managers regime (SMR) governs senior individuals in UK banks, building societies, credit unions, PRA-designated investment firms and UK branches of foreign banks who perform prescribed senior management functions. The employer applies to either the FCA (Financial Conduct Authority) or the PRA (Prudential Regulation Authority) for the individual to be approved as a senior manager. An application must contain, or be accompanied by, a statement of responsibilities. 14
Certification Regime The certification regime covers people working for Financial Services firms, who are not senior managers, but whose jobs mean they can have a significant impact on customers, markets or the firm. Under the certification regime, it is the firm’s responsibility to assess the fitness and propriety of a person. Regulatory References A regulatory reference regime is now in place and, where applicable, references need to cover a period going back six years. 15
Expatriate Senior Executives When moving overseas, consider the following (amongst others):- • The company’s relocation policy • Secondment vs. local hire • Relocation and repatriation allowance • Flights to home location • School fees • House rental costs • Pension contributions or equivalent benefit • Currency for remuneration and calculation of exchange rates • Life assurance • Private medical cover • Tax equalisation (consider taking tax advice) • Accountant’s fees 16
• Your position at the end of the assignment, including the right to be considered for alternative roles Carefully consider the choice of law and jurisdiction provisions in the employment or secondment agreement, in particular their impact on your ability to seek effective redress in the UK courts as far as possible. I’d like to check the relocation policy ... Don’t worry, I have a postal tracking number for you. 17
About the Team Clare Murray Managing Partner clare.murray@cm-murray.com +44 (0) 207 933 9134 David Fisher Partner david.fisher@cm-murray.com +44 (0) 207 933 9133 Sarah Chilton Partner sarah.chilton@cm-murray.com +44 (0) 207 933 9125 Zulon Begum Partner zulon.begum@cm-murray.com +44 (0) 207 933 9123 18
Beth Hale Partner and General Counsel beth.hale@cm-murray.com +44 (0) 207 933 9131 Merrill April Partner merrill.april@cm-murray.com +44 (0) 207 933 9139 Emma Bartlett Partner emma.bartlett@cm-murray.com +44 (0) 207 933 9133 19
CM Murray LLP is a specialist UK Employment & Partnership law firm. Chambers and Partners: Ranked Band 1 for Employment: Senior Executives “ Leading senior executives-focused firm, with notable expertise in whistle-blowing, discrimination claims, and restrictive covenants and their enforcement. Acts for clients from a range of sectors including technology and the financial services.”
Legal 500: Ranked Tier 1 for Employment: Senior Executives “ CM Murray LLP’s ‘first-rate’ practice provides ‘prompt, to-the-point and professional’ advice for senior executives, often handling mandates with cross-border elements.”
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