Leaver provisions

Terms setting out what happens to a departing founder's or employee's shares, often distinguishing good leavers from bad leavers.

Example

A bad leaver being required to sell shares back at their original price.

Important

They must be consistent with the company's constitution to be reliable.

Related terms

  • Vesting Schedule — The timetable over which employer contributions or equity become fully owned by an employee.
  • Vesting cliff — An initial period in a vesting schedule during which no shares or options vest, after which a first portion vests at once.
  • Dead Equity — Ownership held by people no longer contributing to a company, such as departed co-founders or inactive advisers.

Lessons that explain it

  • A founder who leaves without vesting can own a third of the company forever — Founder agreements, vesting and leaver provisions decide what happens when a founder departs. Diligence confirms they exist, are signed and would work as intended. (10 min)

All 578 terms in the Investing glossary