co-founder, stock-options, india, acquisitionSo, I recently joined a company as a co-founder. A couple of batchmates had been working on it for some time and they wanted a lead developer. I was offered the position of CTO and cofounder and was mentioned as a cofounder everywhere. I was given 8% esops to be vested over 3 years. The 8% was so that I would have a significant stake in the company and feel it belongs to me.
I was told by the guys that they can’t give me direct stakes yet because of some tax issues and something I am not entirely clear of. So they told me they’d give me esops which would vest over 3 years and convertible to stocks.
I had only agreed to join if I got the 8% because that way I could feel I was working on MY product.
I joined only a while back so none of the esops have vested yet. So another company is looking to merge with us now. I was just informed by the other two members that ‘The merge happens on the current holdings only’ which basically means that I won’t get any stakes after the merge happens because none of my esops had vested yet. None at all. Zero. Maybe a better salary and some good position. But then without stakes, I don’t feel like this would be my company at all.
What are my option in this situation? What can I do?
If it’s of any relevance, the company is situated in India.
ESOP is less known to me, I had to search for it and understand it implies Employee Stock Ownership Plan. If you believe it means something else, then please correct your post.
I have no experience of Indian law (other than knowing it is slow and paper heavy). If the ESOP was to have a 3year life span, how would the valuation be determined once the three year milestone reached? Did you receive a contract or letter or verbal commitment for the ESOP?
I do know German and UK law both imply you cannot grant someone a company benefit and the remove it without some benefit in kind. I would consider ESOP is a company benefit, no different than a company car for example.
ESOP are sometimes created to as a ‘poison-pill’ to prevent a buyout, and thus this implies to me you could put a stop to the merger unless some reward is offered.
I also know that the term ‘co-founder’ can have different meaning in different legal circles, and thus could imply your rights for reward are stronger.
Try discuss this issue with your colleagues - tell them you received a promise that you would like them to deliver on. Do not sign anything that might desolve your relationship with the current business or create a new relationship with the newly merged business.
Discreetly (meaning without telling your colleagues) seek advice from a lawyer. Assuming that you have an ESOP in writing, in some contractual form, then I would believe your colleagues cannot ignore your right to a reward.
Do not get angry with your colleagues as it will not help your argument, and could give them cause to terminate you. Document all meetings - when decisions are made, email minutes of the meetings to them so that you can avoid misunderstandings.
Best of luck!
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