Bad leaver clause, good leaver clause, share repurchase, contractual provision, unilateral promise, Article 1124 Civil Code, leonine clause, shareholders pact
Reader
Abstract
Extract
of 3
Abstract
The bad leaver clause is valid as it was inserted in a shareholders' pact contract and provides for the repurchase of shares at a predetermined price, with a possible discount.
Extract
[...] It is a clause that allocates all losses, all profits, or nothing at all. Is a bad leaver clause inserted into a contract, which provides for a 30% discount in the event of the general manager being removed for mismanagement, valid? If this clause is valid, can the general manager revise the sale price of his shares to his advantage? A bad leaver clause aims to maintain key men - associates of the company and provides for the repurchase and therefore the transfer of the shares of outgoing associates accompanied by a sanction or reward mechanism according to the situations. [...]
[...] So yes, the clause is valid. Regarding the possibility of revising the sale of shares at a favorable price, it is only possible in the case of a so-called good leaver clause. Indeed, as the bad leaver clause implies sanctions, it is appropriate to reward the "good leavers", i.e. key people who respect the provisions set between the associates. The "good leaver" is the associate considered as the one who has achieved the objectives set out in the clause. In particular, this means that the key person has remained at least for the duration mentioned in the good/bad leaver clause." In accordance with the good leaver clause, if an associate is considered a "good leaver", then he will be rewarded and will be able to sell his shares at a favorable price." In the present case, the departure of the general manager who committed a management fault will be subject to the bad leaver clause and therefore a 30% discount will be applied. [...]
[...] below their market value. The conditions for determining the repurchase price of the shares must be determined in advance in the provisions of the bad leaver clause. Article 1124 of the Civil Code: The unilateral promise is the contract by which one party, the promisor, grants to the other, the beneficiary, the right to opt for the conclusion of a contract whose essential elements are determined, and for the formation of which only the consent of the beneficiary is lacking. [...]
