VC & PE Glossary
What Is Good Leaver?
Updated
Definition
A good leaver is an employee or founder who departs on approved terms—such as resignation for approved reasons or termination without cause—and retains more favorable equity treatment than a bad leaver.
Useful for: Founders, Investors
A good leaver is someone who exits a company under circumstances the shareholder or employment agreement treats as acceptable—triggering gentler equity consequences than a bad leaver.
How it works
Leaver definitions vary by jurisdiction and document. Good leaver events often include termination without cause, death or disability, retirement by agreement, or resignation with board approval. Good leavers typically keep vested shares outright. Unvested equity may be forfeited, repurchased at fair value, or partially accelerated depending on negotiation. Bad leavers— dismissal for cause, competitive breach, or voluntary quit without consent—face repurchase at nominal value or full forfeiture. Founder agreements and employee option plans embed these rules alongside vesting schedules.
Why it matters
- Founders: Negotiate leaver language before institutional money arrives; later rounds standardize terms that may be harsher.
- Investors: Clear leaver mechanics protect the cap table from departed executives holding strategic blocks or from messy disputes during down cycles.
Common mistake
Assuming all departures are treated equally. Without reading definitions, a voluntary resignation can classify you as a bad leaver and wipe unvested upside.
Related ideas
Good leaver / bad leaver, founder vesting, acceleration clauses, and share repurchase rights.
Related terms
- Founder Vesting — Founder vesting is a schedule that determines when founders earn their equity over time, usually tied to continued service at the company. Unvested shares can be repurchased if a founder leaves early.
- Good Leaver / Bad Leaver — Good leaver and bad leaver clauses define how equity is treated when someone leaves—rewarding acceptable exits with fair retention and penalizing misconduct or unapproved departures.
Common questions
Short answers for founders, LPs, and operators