Co-Founder of Company wants to quit


4

I have a unique problem that I was hoping to get some clarity on.

The Co-Founder of our business (in Canada) wants to end the business and get out. The company has been operating for 3 years and has no assets and has not made a profit. The only thing we did successfully achieve is a great online social media following and really strong presence in the community. I am the other founding member and would like to not throw the last 3 years of hard work away and try some new business ideas to help it flourish in the years to come.

She wants it shut down completely, doesn't want to continue working on this and doesn't want me to carry it along without her (probably because if it ever does take off and she walked away from it she would naturally be angry about it).

It is an incorporated business and both names are on file as a dual partnership, both names are also on the bank account. For obvious reasons I am apprehensive about continuing it without her removing her name because if she walks away and I do a ton of work and it becomes a success I would rather her not capitalize on all my hard work. That said she is not willing to remove her name from the business nor wishes for me to continue it.

I want to know if anyone knows what rights I have if I want to continue a business that my partner does not. The business at the moment has zero value but allot of potential. If she as a partner decided she no longer wants to continue do I even have the option of continuing the businesses operation?

We have barely invested any of our own money in this venture, nothing worth mentioning just allot of hard work and time. Any money it has made has basically paid for operating costs such as office space, website fees, banking fees but has generated zero income for either of us. The biggest investment that has been equally put in is a large amount of time. Time we will never get back or compensated for. Clearly my partner has given up and we do not see eye to eye anymore.

She has another business which has now taken off as a result of all the attention we have garnered together and would rather put her energy into that as it is generating a ton of income. My name is not on that other business.

Any thoughts of what I can do? Has anyone faced a similar issue? I will be seeking legal advice but would also like some business advice if available.

Thanks in Advance, I will take all the advice I can get.

Co-Founder Incorporation Entrepreneurs Canada Partnerships

asked Mar 31 '13 at 15:21
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Ben
23 points
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  • which country??? – Frenchie 8 years ago
  • We are in Canada – Ben 8 years ago

2 Answers


1

Well, it seems like she's used your company to set up a competing one and is now fully utilised on that. So I can see why you're not going to get any help from her.

So. You could just scrap the company and start over yourself. Maybe use the existing one to promote your new company, just like she's done.

You could continue as-is, bearing in mind she owns 50%.. but you also own 50%. Depending on the articles of incorporation (you have something written down that sets what you can do, right) then you could try to dilute her holdings. Eg. If you had the right to take on a new investor with just your vote, then do so - expand the company by the amount the investor adds to the company, and suddenly the 3 of you have 33% voting rights each (say). Then you can push her out relatively easily.

Of course, that assumes you do not need her agreement in the first place, but I suppose you could be sneaky about it by suggesting you keep her on the company board, but you and your friend work on it. If you phrase it right she might go for it.

I don't think time counts for anything in business, only what you have directly invested in terms of capital matters as you both should have worked hard at the business. So you can't say you own more of it, unless you really did pay in more to set it up and keep it running. But it all depends on what agreement you both entered into in the first place.

answered Apr 1 '13 at 05:24
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Gbjbaanb
249 points
  • You bring up great points. She currently has the documentation of incorporation but if I remember correctly I was put down as the director. I will have to review the documents to get the exact bylaws and shares agreement. I can easily go back to the registry office and request copies of those documents. Being young entrepreneurs, we never anticipated this type of outcome so neither one of us were too concerned about the legal details as we were starting up. A very powerful lesson in business. I appreciate your advice and once I have the articles early next week, I will post a follow up. – Ben 8 years ago
  • I should mention also that the side business has existed before our business existed but definitely was "put on the map" so to speak with the attention we received from the business we started together. Her side business is not in competition with our current business. It's in the same industry but a different targeted clientele. – Ben 8 years ago
  • ultimately you should talk to her and say you'd like to continue the company without her, or with her in a reduced position as a silent shareholder. I don't think its reasonable of her to say you can't continue nor can you stop. Voluntarily coming to an agreement is the best thing, try to speak objectively and try to gently persuade her to come to a sensible agreement. – Gbjbaanb 8 years ago

1

A couple things seem strange to me:

She wants it shut down completely, doesn't want to continue working on
this and doesn't want me to carry it along without her (probably
because if it ever does take off and she walked away from it she would
naturally be angry about it).

It's not natural or appropriate to be angry that something you aren't a part of is successful. It's natural to be a little jealous if it takes off and you're not on board, but I think it's inappropriate for her to want her co-founder to shut down after years of work, just because she'd rather not see it become successful without her on board.

She has another business which has now taken off as a result of all
the attention we have garnered together and [...] it is generating a ton of income. My name is not
on that other business.

This second business was started while you two were working on the first business, and is directly benefiting from effort you bot put into the first business, but you are not getting any of the money that resulted from your work. Something's off.

I can't tell you what your next move should be, since it depends on what you see yourself doing next. But it looks like you have legitimate options in terms of continuing your current business, or seeing some of the gain of her new business.

answered Apr 1 '13 at 13:26
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Amindfv
186 points
  • Thanks for your feedback amindfv. I should have mentioned the side business she has, existed before the business we started together. That said, her side business did not take off until late 2012 based on the attention we garnered from the main business we built together. So she is basically jumping ships. I'm really hoping I can just reason with her and avoid the mess that I foresee coming but I fear this may be beyond reasoning. – Ben 8 years ago

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