Settlement Agreements for Directors and Senior Executives

Written by: Owen John, Employment Law Partner, Darwin Gray | Last updated: 24/10/2026 | Reviewed by: Owen John

Key takeaways

• Senior exits are more complex: shares, bonuses, LTIPs, board roles, and wide restrictive covenants all come into play.
• You may be leaving two roles at once, employee and statutory director, and both need handling.
• Share options and long-term incentives are often where the real value is, and where the traps are.
• Restrictive covenants tend to be broadest for senior people, so negotiating them matters most here.
• These agreements reward specialist advice, the sums and the complexity justify it.

Why senior settlements are different

A settlement agreement for a director or senior executive isn’t just a bigger version of a standard one. The issues are genuinely more complex, and the value is often spread across things that don’t appear in an ordinary exit at all, share options, long-term incentive plans, deferred bonuses, board positions, and carefully drafted restrictions.

Get those elements right and a senior settlement can be very substantial. Get them wrong, or overlook one, and you can leave serious money or protection on the table. This is an area where the quality of advice directly affects the outcome, and where a standard “review and sign” approach falls short.

Leaving as both employee and director

If you’re a statutory director as well as an employee, you’re usually holding two roles, and an exit needs to deal with both. You’ll typically be resigning your directorship (with the right board and Companies House steps) at the same time as your employment ends.

That raises points a normal settlement doesn’t:

• Resignation and waivers, making sure your resignation as a director is clean and your directors’ duties are properly dealt with.
• Ongoing liabilities, confirming the company isn’t leaving you exposed for things done during your tenure, and considering directors’ and officers’ (D&O) insurance run-off cover.
• Warranties and claims, senior agreements sometimes ask you to confirm things, which needs care.

Handled properly, you get a clean break from both roles. Handled carelessly, loose ends can follow you.

Shares, options, bonuses and LTIPs

For many senior people, this is where the real money is, and where settlements most often go wrong. Depending on your arrangements, your exit needs to address:

• Share options, whether they’re vested or unvested, and what happens to each on leaving.
• Long-term incentive plans (LTIPs) and deferred bonuses, which can be forfeited on a “bad leaver” basis unless negotiated.
• “Good leaver” / “bad leaver” status, this classification can be worth a great deal, and it’s often negotiable.
• Earned but unpaid bonus or commission, which should be accounted for.

The leaver status point alone can swing the value of a settlement dramatically. It’s exactly the kind of thing that needs identifying and negotiating before you sign, not discovered afterwards.

Restrictive covenants: widest at the top

Senior people tend to have the broadest restrictive covenants, longer non-competes, wider non-solicitation, bigger geographic reach, because they have the deepest client relationships and the most access to confidential information. That makes negotiating them especially important at this level, since they can seriously constrain your next move.

The good news is that senior settlements also tend to offer the most negotiating room, because the employer usually wants certainty and a quiet, dignified exit. We regularly narrow or shorten covenants, and offset garden leave against them, so you’re free to move on sooner.

Confidentiality and reputation

At senior level, how your departure is announced and described can matter as much as the money. Settlements often cover an agreed announcement, mutual non-derogatory clauses (so neither side bad-mouths the other), and a carefully worded reference. For someone whose reputation is central to their career, these terms are worth getting right.

This is specialist work

Senior and executive settlements sit at the intersection of employment law, company law, tax, and incentive arrangements. They reward genuine specialist handling. When you work with us, you’ll deal directly with a senior employment specialist who understands all of these moving parts, not a generalist, and who’ll make sure every element, the obvious and the easily-missed, is dealt with. For the value involved, that expertise pays for itself.

Frequently asked questions

What’s different about a settlement agreement for a director?

A director’s exit usually involves leaving two roles at once, employee and statutory director, so it needs to handle your resignation from the board, your directors’ duties, and any ongoing liabilities (including D&O insurance), as well as the usual employment terms. On top of that, senior packages often involve shares, options, LTIPs, and deferred bonuses, and wider restrictive covenants. It’s considerably more complex than a standard settlement, and rewards specialist advice.

What happens to my share options and LTIPs when I leave?

It depends on the scheme rules and whether your options are vested or unvested, but this is often where the biggest value sits. Many schemes forfeit unvested awards for a “bad leaver” but preserve them for a “good leaver”, and that classification is frequently negotiable. Deferred bonuses and LTIPs can also be at stake. Getting your leaver status and the treatment of each award right, before signing, can be worth a great deal, so it needs careful handling.

Can senior executives negotiate their restrictive covenants?

Yes, and it’s especially important at this level, because senior covenants tend to be the widest. Longer non-competes and broader restrictions can seriously limit your next role. Senior settlements also usually offer the most negotiating room, since employers value a quiet, certain, dignified exit. We regularly narrow or shorten covenants and offset garden leave against them, so you’re free to move on sooner. It’s one of the most valuable parts of advice at this level.

Are executive settlement agreements worth more?

They often are, but not automatically, the value depends on handling the complexity well. Shares, options, LTIPs, deferred bonuses, leaver status, and negotiated covenants can all add substantial value, but only if they’re identified and dealt with properly. The risk at senior level is leaving money or protection on the table by overlooking something. Specialist advice is what turns a complex senior exit into a genuinely good outcome.

Talk to us about your senior exit

If you’re a director or senior executive facing an exit, we’ll make sure every element, shares, bonuses, covenants, board duties, reputation, is handled properly and negotiated hard. We’re Darwin Gray, one of Wales’ leading employment law firms. You’ll deal directly with a senior specialist, and as the only firm in Wales offering full Welsh language employment advice at every level, we can help in Welsh or English.

Get a free, no obligation chat with our employment team. Call 02920 829 100 or use our contact form.

Related information

Settlement agreements for employees

Restrictive covenants

Negotiating a settlement agreement

Disclaimer: This guide is general information, not legal advice, and employment law changes. For advice on your situation, please speak to a qualified employment solicitor.

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