Bad Leaver
/bæd ˈliːvə/
A bad leaver is a founder or employee who exits a company under unfavorable conditions, often due to misconduct or actions harmful to the organization.
A bad leaver is a founder or employee who exits a company under unfavorable conditions, often due to misconduct or actions harmful to the organization.
The specific triggers vary by company, but typically include gross misconduct, criminal activity affecting the business, serious breach of contract, resignation without proper notice, or competing against the company.
Your shareholders' agreement should clearly list these situations to avoid disputes later.
When classified as a bad leaver, you'll usually forfeit any unvested shares immediately.
The company or remaining shareholders often have the right to buy back your vested shares, sometimes at their original purchase price (which could be nominal) rather than current market value.
This can mean losing significant value.
A good leaver exits under acceptable circumstances (like redundancy, retirement, or leaving by mutual agreement), whilst a bad leaver departs under problematic conditions.
Good leavers typically keep their vested shares and may retain some unvested shares, whilst bad leavers face much harsher financial consequences.
These clauses protect the company and remaining team members from founders or key employees who leave in ways that harm the business.
They ensure that shares return to the company if someone doesn't fulfil their commitment, maintaining fairness amongst those who stay and continue building value.
Absolutely. During initial negotiations, you can discuss which circumstances constitute bad leaver status and the specific consequences.
Some agreements include "intermediate leaver" categories for grey-area situations, offering middle-ground outcomes between bad and good leaver treatment.
