Questions & Answers
Settling a disagreement among founders regarding a partner's role
We have a founders' disagreement and need a third-party expert opinion to resolve the issue.
Founder A (Founder & CEO) - Holds 51% equity in the company.
Founder B (Co-Founder & Chief Business Officer) - Holds 39% equity in the company.
The rest of the equity is split with angel investors.
The disagreement is between the founders.
Founder B is responsible for business development and sales. After clearly raising several times that Founder B is not brining revenue, not having proper sales pipeline to estimate our growth factor, justify current and onboarding investors, Founder A wants to change the role of Founder B.
Since we have 4 years vesting, Founder A is asking justification to Founder B's role and wants to bring in a new person by stopping equity vesting for the future for Founder B.
However, Founder B is not willing to agree with this and is asking for both parties' equity dilute; not justifying to Founder A why Founder B is failing in the role.
Hi,
I trust you are well!
In such a scenario, various key elements must be considered prior to reach a settlement.
The jurisdiction where the company is incorporated will have a direct influence over the prevailing regulations that govern such disputes.
Moreover, are there any existing agreements in place that provide governance in such scenarios? Applicable by-laws?
For further clarity, we recommend discussing the above via phone call in order to determine the best course of action.
For further information, please contact us via phone or email.
Dear client,
Good day!
This is a corporate commotion matter.
First, we have to send an agenda calling for a board meeting and, with the agenda, clearly confirming the details.
The board meeting will pass for possible board resolution. We have to call, according to Corporate Commotion Law, you have to call for the meeting within 15 days.
If a board resolution is not passed during the meeting, then, we will file the case in court asking for an expert to confirm the rules and obligations giving the report in our favor to proceed with the case.
For further assistance, please feel free to contact us via phone or email.
Thank you!
Hello,
As per your query, what is the legal formation of your company? Is it an LLC or a Freezone company?
As per the information you have provided, founder A has the majority in the company. You and the rest 10% can pass a resolution and file a case for the removal of the partner.
However, the pre-emption right is there for B and also the Memorandum of Association of the company clauses have to be seen and also the manager as per the license which has to be taken into consideration.
Please contact us via phone or email.
