When a founder leaves, the agreement often treats them differently depending on why and how they left. This is the good leaver and bad leaver distinction, and defining it early prevents a bitter argument at the worst possible time.
What is a good leaver?
A good leaver is someone who leaves for reasons the founders agree are legitimate. Typical examples include serious illness, incapacity, death, or a departure by genuine mutual agreement. A good leaver generally keeps the equity they have already earned under their vesting schedule, and is treated fairly on the way out.
What is a bad leaver?
A bad leaver is someone who leaves under circumstances the agreement treats as a breach of trust: being dismissed for cause, resigning to compete, or breaching a core obligation in the agreement. A bad leaver is often treated more harshly. Depending on the terms, they may forfeit unvested equity automatically, and in some agreements may even lose some equity they had otherwise earned.
The labels good leaver and bad leaver are not moral judgements. They are pre-agreed categories that decide what happens to equity, set while everyone is still calm.
Why define this before you need it
The moment a founder is actually leaving is the worst moment to invent the rules. Emotions are high, interests are opposed, and memory is contested. Agreeing the leaver categories in advance — what counts as a good leaver, what counts as a bad leaver, and how each is treated — turns a fight into a lookup.
- Define what circumstances make a founder a good leaver.
- Define what circumstances make a founder a bad leaver.
- State how much equity each keeps, in combination with the vesting schedule.
- Record it in the founder agreement, before anyone has reason to leave.
Leaver terms work hand in hand with vesting: vesting decides how much equity has been earned over time, and the leaver category can adjust what happens to it on departure.