Good and bad leaver provisions — a mainstay of private equity deals — don’t often find themselves in court. A very recent High Court decision has considered their effectiveness.
In Moxon v Litchfield, a former director, Mr Moxon, sought redress in respect of his removal as a director and the provision in the company’s articles of association and shareholders’ agreement that compelled the transfer of his shares at par value where he was characterised as a ‘bad leaver’ (as defined in the articles).
The essence of the case was whether or not Mr Moxon had been correctly characterised as a bad leaver. The court found that he had been. What is of more general interest is the approach the court then took to the operation of the bad leaver provision…
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