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by rsp1984
3774 days ago
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This is a tough situation to be in and you have my empathy. 1) If you have properly set up a vesting schedule in the operating agreement his claims would be pretty baseless and assuming there's no other basis for his claims I'd venture to say you wouldn't need 150k to fight this in court. 2) Even if it turns out to be costly to fight in court, consider this: What would this person's equity be worth if you offered it in a fund raise? From your description it sounds like the fight over equity is a pretty recent event so it's unlikely you'd be forced to bend over immediately. Would it be an option to raise capital for the company and use part of the proceeds to go to court? 3) If all other options fail I'd approach the ousted co-founder together and say he can have his shares but then everyone would walk away from the company due to misaligned incentives and he'd be left with nothing. If you go this route you'd have to make this 100% clear and there can't be a single doubt about that you're going to do this. 4) Talk to a lawyer if you haven't done so already. Hope my answers provide a little help in this matter. Edit: added point 4) |
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Here's three more thoughts (I'm not a lawyer so please double-check this with one if you think it's relevant):
5) Could you get a loan to fund this? Do you have any valuable assets in the company you could use as mortgage? I don't know how it is in the US (I assume that's where you are based) but should you be victorious in court you can probably recover any legal fees from the ousted co-founder.
6) Depending on how you've set up the operating agreement there may also be the option of issuing more shares to the active members of management, thereby diluting down the ousted co-founder.
7) Depending on how much was invested so far and by whom and depending on whether the business is based on any jointly owned core IP or not, you may be able to shut down the company and re-incorporate later as a new company without the co-founder.
From experience I can also tell you that whatever you decide to do, you need to have a good gut feeling about it. If you settle it needs to be on terms that still make you feel proud of the business and about what you've achieved and you need to feel motivated to move forward.