Plan rules

What they are

Plan rules are the document that governs a bonus, share, option or other incentive scheme. Your contract usually says no more than that you may take part. The plan rules decide what you receive, when, and what happens when you leave.

They are often written by the parent company, under another country’s law, and amended from time to time. Many executives have never read them.

Why they matter more than the contract

At exit, most of a senior package can be in unvested awards and deferred bonus. Whether you keep them turns on the plan rules, not on Maltese employment law. And the rules usually give the board, or a remuneration committee, wide discretion.

What to look for

• Leaver provisions: who counts as a good leaver or a bad leaver, and what each keeps.
• Vesting: dates, conditions, and whether awards vest in full, in part (time pro-rating), or not at all on leaving.
• Discretion: who decides, on what grounds, and whether it must be exercised reasonably.
• Malus and clawback: the triggers and how long they last. See malus and clawback.
• Change of control: what happens on a sale or merger. See change of control.
• Governing law and amendments: which law applies, and whether the rules can be changed against you.
• “Active employment” and “under notice” tests: many plans pay only those who are still employed, and not under notice, on a set date.

What to do

Ask for the current plan rules, and any award letters, at the start. Read them with your contract and any side letter. Then decide what to ask for: good leaver treatment, a favourable exercise of discretion, or cash in place of awards that will lapse.