On the other hand, at Braid, the Tribunal unanimously accepted that the divestment provisions in the Bad Leaver clause were ancillary obligations. They were a primary obligation to comply with a service contract and provided a mechanism to deal with the consequences of a breach of that primary obligation. With respect to the question of whether the ancillary obligations were an unenforceable sanction, two of the three judges found that this was not the case. They found that it was not unfair for a shareholder guilty of gross misconduct to have to give up his shareholding and recover his original financial share in return. However, a judge objected to this analysis and found that the clause was punishable. In the recent case of Signia Wealth Limited/Vector Trustees Limited  EWHC 1040 (Ch), the company considered Ms. Dauriac a bad graduate after terminating her employment contract with the company, and argued that the wrong-finding clause that required her to compensate her shares at a rate substantially reduced to their face value was a punitive clause. The Court reviewed the relevant tests and found that the miscalcized provision was neither exorbitant nor unacceptable, despite a substantial reduction in the payment of Ms. Dauriac`s quotas.
The rule for sloths was therefore applicable. For listed companies, there is by definition a market price for shares. For private stocks, there is no market price. Often, the shareholder agreement will provide a solution to avoid costly quarrels. We are specialists in the development of both the employment settlement contract and the share transfer documentation. It is worth taking the time to lead the debate and ensure that the withdrawal rules reflect what all parties really want to do in a period that is probably stressful for all concerned. The reason institutional investors like good exit/bad-leaver clauses is that they offer a mechanism to take control of someone who is no longer needed to start the business. It may be cynical that investors do not want to cede power to anyone (let alone someone who does not play a future role in increasing the value of the investment), but such a tactic is commercially reasonable.