{"id":228762,"date":"2025-03-04T15:21:41","date_gmt":"2025-03-04T02:21:41","guid":{"rendered":"https:\/\/legalvision.co.nz\/?p=228762"},"modified":"2025-03-04T15:22:52","modified_gmt":"2025-03-04T02:22:52","slug":"leaver-events","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/startups\/leaver-events\/","title":{"rendered":"What is the Difference Between Bad and Good Leaver Events?"},"content":{"rendered":"\n

Many companies incorporate leaver provisions into the rules of their shareholders agreement<\/a>. These leaver provisions apply when a shareholder or founder also contracted or employed by the company leaves the company. Under leaver provisions, typically, this departure would then trigger a compulsory transfer where the departing shareholder must sell their shares in accordance with the relevant process set out in the shareholders agreement (which might require the shares to be sold back to the company or to the remaining shareholders of the company).<\/p>\n\n\n\n

Leaver provisions incentivise the employee shareholder or founder to remain working for the company long term, particularly in the startup context where businesses rely on services from their key employees or founders for success. There are two different types of leaver events: good leaver and bad leaver events. This article will outline the definitions and outcomes of both these events.    <\/p>\n\n\n\n

Shareholders Agreement<\/h2>\n\n\n\n

Leaver provisions will usually be outlined in the company\u2019s shareholders agreement. As the default rules under New Zealand law do not require a shareholder who has left a business to sell back their shares, it is important that these provisions are considered for the shareholders agreement, and included where necessary. The shareholders agreement will define what situations constitute a bad leaver versus a good leaver event as well as setting out the process for how the company should treat the different types of leavers.<\/p>\n\n\n\n

Additionally, if a company seeks to enforce its good and bad leaver provisions in the shareholders agreement, keeping copies of underlying documentation is important. The company should ensure that any shareholders subject to the leaver provisions have entered into an employment or contractor agreement.<\/p>\n\n\n\n

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This ensures that there is a written record of the expected commitments from these shareholders and where the agreement is terminated, this will be clear evidence for triggering the good and bad leaver provisions.<\/p>\n<\/div>\n\n\n\n

What Are Good Leaver Events? <\/h2>\n\n\n\n

Broadly speaking, good leaver events occur when an employee or contractor shareholder has left the company on good terms or for reasons outside of their control. Usually, a good leaver has ceased to be employed or engaged by the company as a result of:<\/p>\n\n\n\n