legal, sharesThis is somewhat embarrassing. I joined a startup in the US, and the founder will not tell me or anyone the number of shares outstanding. I accepted an offer for a certain number of shares, but I have no idea if my shares are 10% of the company or 0.000001% of the company. I haven’t left my full-time job so I can just quit. I looked up the company on the state entity search, and the number of shares must have been increased. It is a C-corp. As an owner of the company do, I have a right to know the number of shares (even though they aren’t vested) or see the shareholders agreement?
If the number of shares have been increased and you haven’t been notified, it’s a pretty good sign you’ve been diluted down. (This is just a 10,000 foot assessment based on very limited info.)
If there’s a shareholder agreement or corporate bylaws, you should definitely review those docuents. (In terms of financial data, there might be a clause that denies you certain rights or information, but in general, corporations have a duty to disclose financial information.)
The downside is, if the founder is uncooperative, your only recourse would be to to take him to court. This course of action is known as a derivative suit and is actually fairly common.
The fact that you don’t know what percentage of the company your shares represent is a very bad sign.
The number of shares you have and their individual value is far more important than the percentage stake you own (unless you are looking at taking over?). Your number of shares will remain static unless you are issued any more, your percentage will drop over time as you become ‘diluted’ - i.e. more shares are being created and issued to new investors.
Many people will see this dilution as a bad thing - but the reality is that the number of shares actually remains the same and the value of each share can go up making your stake (no matter what percentage) more valuable.
If there is a shareholder’s agreement then you should be able to see a copy so you know what you are agreeing to. The fact that the founder won’t tell you how many shares there actually are is more an indication of their personality. The lack of transparency would be an concern for me if I was employed by them but not a deal breaker as long as I could get the other information mentioned above
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