Good Leaver / Bad Leaver
Provisions in a management equity plan determining the price at which a departing manager's shares are bought back, depending on the reason for departure.
Also known as: Leaver provisions, Good leaver bad leaver clause
Good leaver
A manager who leaves for approved reasons (illness, death, retirement, redundancy) is a good leaver — they receive fair value (or sometimes a premium) for their shares.
Bad leaver
A manager who resigns voluntarily or is dismissed for cause is a bad leaver — they typically receive only cost or nominal value for their shares (a financial penalty).
Why it matters
Leaver provisions incentivise management retention and alignment. TS teams review these provisions when assessing management stability in a buy-side FDD.
Related terms
MBO (Management Buyout)
A transaction in which the existing management team acquires the company, typically with backing from a private equity sponsor.
Ratchet
An equity incentive mechanism where management's percentage ownership increases if investment returns exceed agreed thresholds.
Preference Shares
Shares that rank ahead of ordinary shares for dividends and/or proceeds in a liquidation or exit, often used in PE structures to return capital to the fund before management.