# Leaver's Percentage > in relation to and for the purposes of determining the number of Employee Shares that are required (pursuant to Article 19) to be converted into Deferred **Term:** Leaver's Percentage **Last updated:** 2026-07-29 ## Definition ## What Leaver's Percentage Means in a Contract Leaver's Percentage is a defined term found in shareholders' agreements, articles of association, and vesting schedules that govern what happens to a Founder's or Employee's shares when that person leaves the company before a set milestone. Rather than treating every departure the same way, the mechanism ties the number of shares affected to a percentage figure that reflects timing. The earlier someone leaves relative to the Commencement Date or Date of Adoption, the higher the percentage of their Employee Shares that typically becomes subject to conversion or transfer. The concept exists to protect the remaining shareholders and the company from a scenario where someone receives a full allocation of equity but exits shortly after joining, having contributed little to the business's growth. By calculating a Leaver's Percentage, the agreement creates a formula-driven, objective way to claw back a proportionate share of unvested or unearned equity, usually converting it into Deferred Shares that carry minimal or no economic value. ## How Leaver's Percentage Is Defined or Measured The percentage is generally calculated by reference to the length of time between a start date, often called the Commencement Date or Date of Adoption, and the date the person's employment or engagement actually ends, referred to as the Effective Termination Date. The formula typically compares the elapsed period against the full vesting or qualifying period set out in the agreement, then rounds the result to produce a clean, usable figure. Because the calculation depends on precise dates, agreements usually specify exactly which events trigger the start and end of the period. Ambiguity here can lead to disputes, so well-drafted clauses define terms like Effective Termination Date with care, sometimes distinguishing between notice being given and employment actually ceasing. - The starting reference point, commonly the Commencement Date or Date of Adoption - The ending reference point, the Effective Termination Date - Any rounding convention applied to the resulting percentage - Whether the percentage applies uniformly or varies by leaver category, such as Good Leaver or Bad Leaver ## Where Leaver's Percentage Appears in Agreements This term is most common in shareholders' agreements, articles of association, and employee share scheme rules used by growth companies and startups that issue equity to founders and key staff. It frequently sits alongside related concepts such as Deferred Shares, Good Leaver and Bad Leaver definitions, and vesting cliffs, all working together to govern equity outcomes on departure. Sectors with significant reliance on equity incentives, including [technology](https://www.genieai.co/industry/technology) companies and firms in [finance](https://www.genieai.co/industry/finance), use Leaver's Percentage provisions extensively because founder and employee turnover can materially affect capitalization tables. HR and legal teams drafting an [employee handbook](https://www.genieai.co/en-us/template-type/employee-handbook) or related equity policy documents often cross-reference these percentage mechanics to ensure consistency across employment and shareholder documentation. ## Why the Exact Wording Matters Small differences in how Leaver's Percentage is worded can produce very different financial outcomes for a departing individual. If the definition is vague about rounding, the reference dates, or how partial years are treated, disputes can arise over whether the correct number of shares was converted or transferred. Courts interpreting such clauses will look closely at the plain wording under the law governing the contract, since these percentage formulas are mechanical rather than discretionary. Precision also matters because Leaver's Percentage interacts with other defined terms, such as Deferred Shares and Effective Termination Date. If those linked definitions are inconsistent or poorly drafted elsewhere in the document, the percentage calculation itself becomes unreliable, potentially triggering costly renegotiation or litigation between the company and a departing shareholder. ## Drafting Considerations When drafting or reviewing a Leaver's Percentage clause, careful attention should be paid to how the commencement and termination dates are defined, whether the formula accounts for partial months or only full months or years, and how rounding is handled to avoid disputes over fractional shares. Drafters should also consider whether the percentage should differ depending on whether the individual is classified as a Good Leaver or Bad Leaver. It is also worth cross-checking the Leaver's Percentage definition against related provisions covering [deferred shares](https://www.genieai.co/blog/unlocking-the-potential-of-deferred-shares-uk) to confirm the conversion mechanism operates smoothly in practice. Clear, internally consistent drafting reduces the risk of ambiguity and helps ensure that both the company and departing individuals understand exactly how their equity position will be affected. ## Context ### Relevant circumstances - When an employee shareholder ceases to be employed during a vesting period - If unvested equity must be converted to deferred shares on a leaver event - Where a formula calculates the proportion of shares that vest at departure ### Relevant sectors - Technology - Finance ## Relevant contract types - [Employee Handbook](https://www.genieai.co/en-us/template-type/employee-handbook) --- This is the Markdown representation of [https://www.genieai.co/en-us/define/leavers-percentage](https://www.genieai.co/en-us/define/leavers-percentage), provided for AI agents and crawlers. The HTML page is canonical. See [/llms.txt](https://www.genieai.co/llms.txt) for the full content map.