Also known as a golden parachute (www.practicallaw.com/6-107-6656). Financial benefits provided to employees (usually senior employees or directors) on leaving their employer. Such provisions may be:
A long fixed-term contract giving rise to damages in the event of early termination;
Payment of a fixed sum in the event of employer repudiation or non-renewal of a contract; or
The option to resign and claim a fixed sum in the event of a change of control of the company because of a takeover.
Such clauses run the risk of being held unenforceable as a penalty (www.practicallaw.com/A36638)if they are payable on breach of contract and do not genuinely pre-estimate the loss that an employee may suffer. Approval of such clauses by directors may also fall foul of their fiduciary duty (www.practicallaw.com/A36087) to act in good faith in the best interests of the company. See also Golden hello (www.practicallaw.com/8-107-6655) and Golden handcuffs. (www.practicallaw.com/3-107-6653)