What is sweat equity?

Shares given in return for work or services rather than cash, typically to early team members, advisers or promoters. It lets a company secure help it cannot yet afford, but it should always come with conditions, such as vesting and leaver provisions, so the shares can be recovered if the contribution stops.

What is a bad leaver?

A shareholder who leaves, or stops contributing, in circumstances defined as bad in the company's articles or a shareholders' agreement, such as breach of their obligations. Bad leavers are usually required to give up their shares at a low price, often nominal value, while good leavers receive fair value.

How does a company buy back its own shares?

The buyback contract must be approved by the shareholders by resolution, the price paid from distributable profits or another permitted source, and the shares cancelled. Returns must be filed at Companies House and stamp duty may be payable on larger amounts. Getting a step wrong can make the buyback void.

Shares for promotion that did not happen: buying back influencer shares as bad leavers

A London supplements brand that gave shares to social media influencers in return for promotion, and took them back at nominal value when the promotion never came

By Malcolm Zoppi20 October 2026Retail and e-commerce

Key facts

Deal type: Corporate restructuring
Acting for: The company
Business: Supplements brand, London
Sector: Retail and e-commerce
Deal value: Nominal value
Structure: Buyback of the influencers' shares at nominal value following bad leaver circumstances
Timescale: Followed several rounds of formal letters requiring the breaches to be remedied
Completed: January 2026
Lead solicitor: Malcolm Zoppi

At a glance

A London supplements company was one of our early clients. Its founders came to us with an idea: rather than pay social media influencers to promote the brand, give them shares. The directors would run the business; the influencers would promote it; everyone would share in the growth. We issued the shares as sweat equity. The promotion did not materialise, formal letters requiring the influencers to put things right went unanswered in substance, and in January 2026 we completed a buyback of their shares at nominal value on the basis that they were bad leavers.

The client and the objective

Sweat equity is an attractive way for an early-stage company to secure help it cannot afford to pay for. The risk is that the shares are permanent while the effort may not be. When the influencers stopped delivering, the founders wanted the shares back, at the lowest possible cost, without a dispute that would distract them from running the business.

The deal

Original issue of shares to the influencers as sweat equity, in return for promotion of the brand.
A series of formal letters requiring the influencers to remedy their failure to deliver.
A buyback of the influencers' shares by the company at nominal value, reflecting their status as bad leavers.
Shareholder approval of the buyback, cancellation of the shares and the Companies House filings.

Key legal issues and how we solved them

Giving people the chance to put it right

Before treating anyone as a bad leaver, the company had to be able to show that it had given them a fair chance. The letters set out what had been promised, what had not been delivered and what was required to remedy it. When nothing changed, the company was in a strong position to act.

Bad leaver at nominal value

Sweat equity arrangements need a way to unwind when the contribution stops. Treating the influencers as bad leavers meant their shares came back for their nominal value rather than market value, so the founders recovered the equity without paying for growth the influencers had not helped create.

Doing the buyback properly

A company buying its own shares has to follow the Companies Act: shareholder approval of the buyback contract, payment from a permitted source, cancellation of the shares and filings at Companies House within the deadlines. A buyback that skips a step can be void, so each step was documented.

Outcome

The buyback completed in January 2026. The influencers are no longer shareholders and the founders hold the equity back in the company, ready to use for future hires or investors.

What this deal shows

Sweat equity is only as good as the leaver provisions behind it.
A documented chance to remedy makes the eventual bad leaver decision far harder to challenge.
Share buybacks are technical; a missed formality can undo the whole transaction.

“Shares for promotion is a good idea until the promotion stops. The founders gave the influencers every chance, and when it came to it the leaver provisions did their job.”
Malcolm Zoppi

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Frequently asked questions

: Shares given in return for work or services rather than cash, typically to early team members, advisers or promoters. It lets a company secure help it cannot yet afford, but it should always come with conditions, such as vesting and leaver provisions, so the shares can be recovered if the contribution stops.
: A shareholder who leaves, or stops contributing, in circumstances defined as bad in the company's articles or a shareholders' agreement, such as breach of their obligations. Bad leavers are usually required to give up their shares at a low price, often nominal value, while good leavers receive fair value.
: The buyback contract must be approved by the shareholders by resolution, the price paid from distributable profits or another permitted source, and the shares cancelled. Returns must be filed at Companies House and stamp duty may be payable on larger amounts. Getting a step wrong can make the buyback void.

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