Good Leaver and Bad Leaver
Definition
Contractual terms that determine what happens to unvested and vested options when a recipient leaves the company. Good leaver provisions typically allow departing recipients who leave under defined circumstances to retain or exercise some or all of their vested options. Bad leaver provisions typically result in forfeiture of unvested options and may affect vested options depending on the terms. These provisions must be documented in the equity compensation plan and in each grant agreement.
Common Misapplication
The most common misapplication is omitting good leaver and bad leaver provisions from grant agreements on the basis that the relevant circumstances are unlikely to arise. Disputes about what happens to vested options when an employee leaves under ambiguous circumstances are among the most common sources of legal conflict in early-stage companies.
FFI Standard Reference
This term is defined and applied in Book 3, Section 3.3: The Equity Compensation Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Good Leaver and Bad Leaver. https://ffistandard.org/glossary/good-leaver-bad-leaver/. 2026.