equityI recently decided to step down from a position in a startup in which I was declared a co-founder (even though I came on later than 3 partners). There was a hostile environment being created in which the CEO continued to criticize me, in some cases in front of other partners and former partners.
After increasing the customer base by 10X, he was frustrated that it was taking too long to increase another 10X. At the same time, every time I launched an ad campaign I'd get emergency texts or calls saying to take down the campaign because it was exceeding our capacity (i.e. too many takers). I was consistently pointing out key issues that were either limiting our growth or liabilities in our business model.
The company had been setup with the "Slicing the Pie" equity distribution model, and after hundreds and hundreds of hours contributed, I had approx. 12% equity built up.
After a particularly egregious email from the CEO, I announced that I’d be stepping down. I met with the CEO who seemed perfectly happy with my departure and we made an agreement that I would be a silent partner going forward. My equity would not be touched, it would simply dilute as my contributions halted going forward. I would however have an equal vote on all decisions impacting my equity (taking on capital, selling, changing structure, etc).</p>
A couple of weeks later, I lost access to company accounts that I'd been told I'd be able to keep. I reached out and after many, many attempts, the CEO apologized and said it wouldn't happen again. A couple of weeks later, I noticed that I was unable to access the file tracking our equity split. Again, after many, many attempts, I finally got an email saying that the group voted to vacate my equity entirely.
The argument is that I left without good reason and my time was therefor valued at zero. Now, the company is currently not profitable. But when/if they do become profitable, I believe that my (diluted) stake should be recognized.
After a conversation with the partners, it is clear that they have no intention of honoring our agreement (which they do not deny exists but was not on paper). There is no exit clause one way or another in our partnership agreement. There is significant documentation about my hourly contributions on a weekly basis.
The questions:
For one I've never heard of shareholders being able to just "vote off" another's equity like they did. But them, if you've no agreements or anything specific from them in writing, and kept no copies of the related communications, well... things aren't rosy either. (Then again, you do have an "email saying that the group voted to vacate my equity entirely" which, technically, is documentation that you could use against them.)
Methinks you've three sensible options:
Assuming your lawyer thinks it can work out (IANAL), that last option might be in your best interest. Because on their end they could very well shut things down and start anew if you become too big a distraction, with you potentially owning a piece of something worth nothing. By contrast, if you let them get big enough that they can no longer easily reboot, and then expose how they're naked at the worst of moments, they'll more likely be willing to write a check to get you off of their back.
(Also, in case the situation arises because of due diligence while raising funds: do not, under any circumstances, sign a document wherein you agree that you've no further claims on the company without getting a lawyer involved.)
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