I have shares in my company but want to resign. What will happen to my shares?

I have shares in my company but want to resign.  What will happen to my shares?

It is not uncommon for employees to own shares in their employer.  This can take various forms, for example as part of a share scheme or following a purchase of shares, and your legal position in relation to your shares upon resignation will largely depend on the terms of the shareholder agreement.  Your legal position will also depend on whether you own the shares, or if your ownership is contingent on a future event.

Shares you already own

In general, existing shares which you own are your property independent of your employment.  Consequently your employer cannot compel you to sell back your shares to the company, but nor can you compel your employer to buy back your shares.  While this is the position at general law, it is often the case that your employer’s company constitution or share agreement will contain terms explicitly dealing with employee shares upon resignation.  These terms may require you to sell back some or all your shares to the company upon resignation at an agreed value which is enforceable. If there may be no such term it may be difficult to find a buyer for your shares should you wish to dispose of them especially in the case of smaller proprietary companies. In such a case you may find yourself “stuck” with the shares in circumstances where you no longer wish to retain them. In this instance your rights arise from the Corporations Act 2001 (Cth).

This is a complex area of law which results in a large volume of litigation and accordingly if you are in this position you should seek legal advice.

Share options and contingent offers

It is common for companies to offer their employees share options or grants which are contingent on their continuing employment or achievement of targets at some time in the future.  In general, future interests contingent on continued employment do not normally survive resignation, however this is governed by contract law, and thus your right to future interests can vary drastically depending on the terms of your employment contract, the terms of any other agreement you have entered into, and the circumstances of your employment.

Each situation is unique and you should inform yourself about the consequences of resignation on your shareholding. If you are no certain of your position you should seek legal advice to avoid taking acting which results in a loss of rights or entitlements.

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