I am a leaver, what price to acquire my shares ?

Once the various scenarios relating to a founder’s departure and the vesting conditions have been established, an essential question is to determine the purchase price for the founder’s shares.

As always with leaver clauses, the circumstances of the departure will have a considerable impact on the price of the founder’s shares.

Why does the purchase price vary depending on the qualification of the departure?

The purpose of the good leaver / bad leaver clause, with its variations in the purchase price, is to protect the company and encourage the long-term commitment of the founders. In situations where a founder’s behaviour could harm the company, such as in the case of serious misconduct, so-called bad leavers clauses limit the financial benefits for the founder. The aim is to prevent the beneficiaries of the purchase option from having to pay a high price for shares to a founder whose behaviour has damaged the company. Conversely, in the case of a departure without conflict or fault, the good leaver and early leaver clauses reward a founder by making the purchase of his shares more advantageous, thus facilitating a smooth transition.

This system of varying the price according to the departure scenario creates a balance that protects the interests of each party. It protects founders and investors from the potential effects of hasty or conflicting departures, while offering a reasonable and appropriate price to a founder who leaves under legitimate conditions.

In short, the good leaver / bad leaver clause helps to stabilise a start-up’s shareholder structure. They make it possible to manage departures more equitably, by adapting the price per share according to the circumstances, which reinforces the protection and good health of the company.

Because the purchase price of a founder’s shares depends on several factors, its financial impact can vary significantly. To better understand these differences, you can use our good leaver / bad leaver simulator, which allows you to model different scenarios and visualise the resulting share value.

1. Bad Leaver : A symbolic or very low share price
   
   When a founder leaves the company because of serious misconduct or fraud, he/she is generally referred to as a Bad Leaver. The price retained to buy the shares of a Bad Leaver is very low, sometimes symbolic, and can be set either by reference to a nominal value, the book value, the net assets or a market value with a substantial discount, or the lowest of several of these reference values.
   
   This reduced price is intended to protect the company and the other shareholders and enable them to recover the shares, at a time when the company is undoubtedly experiencing significant stress, at a low cost and hence enabling them to allocate them to the outgoing founder’s replacement.
   
   
   In order to avoid situations of conflict, we at Beyond recommend that the price be easily determinable without the need to resort to experts or interpretations of figures, and that a discounted but still non-symbolic value be retained.

2. Early Leaver : A mixed price based on share vesting
   
   The Early Leaver situation refers to the voluntary departure of the founder before a minimum period of collaboration (generally set at three to five years). For this type of departure, the share price depends on a mechanism known as vesting.
   
   Depending on how far vesting has progressed, the shares of an Early Leaver founder are divided into two categories:
   – Vested shares: shares that the founder has definitively acquired after spending a certain amount of time with the company. These vested shares are generally bought back at a price equivalent to a good leaver; and
   – Unvested shares: shares that have not yet reached the vesting threshold when the founder leaves the company. These unvested shares are bought back at a price equivalent to a bad leaver situation.
   
   This creates a balance by partially compensating for the founder’s past contribution while protecting the company against premature departure.

3. Good Leaver : a price based on the market value of the shares
   
   In the event of a good leaver departure, the leaving founder generally benefits from a more favourable price per share based on the market value of the shares. This price is either determined by an independent valuation, via an expert, or set on the basis of recent capital increases or secondary transactions.
   
   In some cases, the price per share in the event of a founder’s good leaver departure may even be defined by a predetermined formula, agreed when the good leaver / bad leaver clause is drafted and to be applied on the latest approved annual accounts.

Frequently asked questions

At what price will my shares be purchased if I leave as a bad leaver?

The price is typically significantly reduced and may in some cases even be symbolic. Depending on what has been agreed, it can be based on nominal value, book value, net asset value, market value subject to a substantial discount, or the lowest of several of these reference values.

What price applies for a good leaver?

A good leaver generally benefits from a more favourable price, often based on the market value of the shares. That value can be determined by an independent valuation by an expert, by reference to a recent funding round or secondary transaction, or through a formula agreed in advance in the shareholders’ agreement.

How is the price calculated for an early leaver?

An early leaver is often subject to a mixed pricing mechanism linked to vesting. Vested shares may be repurchased at the good leaver price, while unvested shares may be repurchased at the bad leaver price. The exact mechanism depends on the vesting arrangements and the terms agreed between the parties.

Why does the price vary so much depending on the leaver status?

Because the pricing mechanism is intended to reflect the circumstances of the founder’s departure while protecting the company and encouraging long-term commitment. A departure involving serious misconduct may therefore result in a significantly reduced price, while a departure without fault may entitle the founder to a price that more closely reflects the value of the shares.