Hybrid energy storage system (HESS) consists of different electrical storage devices with complementary characteristics to satisfy both the energy and power requirements of the load. This study presents an improved frequency sharing algorithm for battery/ultracapacitor (UC) HESS in the presence of delay. Time delay is inevitable with the digital implementation of control algorithms. Presence of delay deteriorates the transient response of the system by limiting the bandwidth of inner current loops. The DC-link voltage will settle only after settling of the slower loop, i.e. battery loop, hence the presence of delay will make the system response slower in conventional methods. However, the improved algorithm shares battery current loop error during transients with faster UC current loop and hence DC-link voltage settling becomes faster. Furthermore, for safe and efficient operation, an energy management algorithm (EMA) has been designed that ensures nominal UC voltage and other operational constraints as described in the study. To analyse the effect of UC voltage control loop on the operation of the DC-link voltage control loop during transients, UC voltage control loop with different bandwidths have been designed and tested. Microcontroller based implementation was done for experimental verification of the improved control algorithm and EMA.