Leaving the team but dispute over shares?


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I am a software developer and I have been working with a few others in a startup for just over a year. However there has been a lot of conflicts lately and I can no longer work with them. I have decided to leave however we are having dispute over the amount of share I own (vested) in the company so far. We've never signed a shareholders' agreement. I do have Emails from earlier on showing that I would own 20% of the company for my work (without mentioning anything regarding vesting). However, shortly after those emails we have Orally decided that the shares would vest over a two years period. Now it's been 12 months, which means I should have 20*12/24 = 10% shares vested in the company. However the team have told me to leave and owning an arbitrary 5% stake.

So I guess going to the court is my only option.
I'm wondering what are the potential outcome and procedures? Those Oral agreements, I'm sure my team members would just unanimously deny, even under oath. Will the Email document showing the 20% be of any help to me? (If the Email says I would get 20% for doing xxx and yyy work, without anything about vesting, then legally it would be interpreted that I deserve the full 20% for doing the xxx and yyy work. Is this correct?)

Also, while I see potential in this startup, but until now this startup has not made any money yet, do I have the option to wait and see if they will actually make money before proceeding with legal actions, so that it's worth the lawyer fee? If so, how long do I have before I have to file in court?

Thanks for any advices.

Legal Shares

asked Dec 16 '11 at 03:43
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James Gu
103 points

4 Answers


3

Is this a real company? By this I mean did you incorporate the business and file incorporation papers?

If so, do the incorporation papers list the shareholders?

Those papers would have a lot of weight in resolving any dispute and would firmly establish your claim to whatever share they show you as having.

If you guys never incorporated then you do not have a corporation, only a partnership which will terminate upon your departure. Remember that if you have not assigned your intellectual property rights to the venture, they are still yours and you can take them with you. Specifically this means you own the code you wrote.

Perhaps they would like to negotiate with you for rights to your code?

answered Dec 16 '11 at 06:48
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Jonny Boats
4,848 points

2

"...going to the court is my only option" No, I would advise you to walk away, save your time, energy and money for something more productive.

Whether the business is successful or not, the difference between the 5% they offered and the 10% you claim is so small, as to be not worthwhile fighting over.

Life is too short to waste it on legal battles that may well end up costing more than the "extra" 5% will ever be worth. You could spend a stressful year on this and end up losing, or you could spend a year building something better that was your own.

Of course, IANAL, IMHO, YMMV, etc.

answered Dec 16 '11 at 05:06
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Steve Jones
3,239 points

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Don't know the legalities, but have you considered how much your potential upside could be worth if you did take the legal route vs. how much the legal route would cost? If the startup hasn't made any money, you have to soberly consider what "has potential" really means.

answered Dec 16 '11 at 03:55
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Nicko
840 points

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Just curious but did you sign a non-compete? If you did not sign one then maybe you can haggle with them and exchange the extra 5% (total 10%) and you will agree to sign a non-compete agreement and you wont take your software or the idea in total to another company or start one of your own. If you did sign one then you may have to take another route to obtain the extra 5% but if it involved lawyers and fee's now then I would think long and hard before I made that kind of move, you may just be setting yourself up for misery and no payout.

Good luck,
Tim - VA

answered Dec 16 '11 at 05:47
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Tim
670 points

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Legal Shares