Meaning
Equity incentive framework provisions protect departing founders and senior employees from punitive stock forfeiture when separation occurs without fault or under approved conditions. A good leaver designation grants departing participants the right to retain vested equity or receive fair market value compensation for repurchased shares. Standard triggers for this classification include termination without cause, permanent disability, death, redundancy or voluntary resignation approved by the board of directors.
The boundary of this protection ceases if the departure involves voluntary resignation prior to agreed vesting milestones or breaches non-compete agreements.
Termination Context
Executive separations require formal documentation to establish the factual basis of exit. Corporate board resolutions and separation agreements record the specific contractual clauses governing the departure. Proper documentation prevents post-termination reclassification that could strip vested shares from departing team members.
Equity Retention
Cap table calculations reflect preserved equity holdings following an un-blameworthy departure. Retained shares remain subject to standard shareholder agreements, including drag-along and tag-along rights during future liquidity events. Corporate registers record these retained holdings, maintaining accuracy for subsequent equity financing rounds.
Valuation Protection
Share repurchase calculations for un-blameworthy exits require fair market value determinations rather than nominal price clawbacks. Independent valuation reports or recent preferred share financing prices establish the per-share compensation payable to the departing individual. Neglecting to specify valuation formulas in shareholder agreements leads to contentious disputes, incurring legal expenses and delaying corporate restructuring.
