Leaver provisions explained: What founders need to know

Frequently Asked Questions

What's the difference between a good leaver and a bad leaver?

Good leavers are people who leave through circumstances beyond their control (death, disability, redundancy, retirement) or by mutual agreement, while bad leavers typically resign voluntarily or are dismissed for cause. The distinction matters enormously because bad leavers usually receive only nominal value for their shares, while good leavers receive fair market value or formula-based pricing.

If I resign after two years, will I lose all my shares?

It depends on your shareholders' agreement terms. Most agreements classify voluntary resignation in the first 2-4 years as bad leaver status, meaning you'd forfeit unvested shares completely and sell vested shares back at nominal value (often €0.01 per share) or original subscription price. You should negotiate time-based good leaver status or resignation rights before signing to protect yourself.

Do I keep my shares if the company fires me without cause?

Yes, being made redundant or dismissed without cause typically qualifies you as a good leaver. This means you'll forfeit unvested shares but can sell your vested shares at fair market value rather than nominal value. However, the specific definition varies between agreements, so check your shareholders' agreement carefully.

What happens to unvested shares when I leave?

Unvested shares forfeit completely regardless of whether you're classified as a good leaver or bad leaver. For example, if you leave after three years of a four-year vesting schedule, you keep or sell 75% of your allocation at the applicable price, but the remaining 25% simply disappears with no payment.

Can I negotiate better leaver terms before signing?

Yes, everything in shareholders' agreements is negotiable before signing, especially at early stages when you have more leverage. You should negotiate for time-based good leaver status (becoming a good leaver after 2-3 years regardless of reason), fair value buyback even for bad leavers after minimum service, and clear objective criteria for classification rather than accepting investor standard terms automatically.

What if the company sells after I leave but before my shares are bought back?

You typically participate in the exit proceeds if the sale happens before the buyback completes. However, your agreement may specify full participation for good leavers or reduced participation based on time since departure, which can significantly affect whether you benefit from successful exits you helped build.

Will I still have voting rights if I keep some shares after leaving?

No, departed shareholders who retain shares typically lose special rights like board seats and protective provisions. Your shares often convert to different classes with reduced or no voting power, though economic rights to dividends and exit proceeds usually remain intact for shares not bought back.

Can the company force me to sell my shares when I leave?

Yes, when leaver provisions trigger, the company or remaining shareholders typically have an option to purchase your shares, and you cannot refuse if they exercise it. The agreement creates binding obligations requiring you to sell at the specified price, whether that's nominal value for bad leavers or fair market value for good leavers.