3 ms·
So, I've been through very similar, fairly recently. I exited my business of ten years due to a combination of slow death by stress, strategic disagreement, an
by madaxe_again 9y ago
So, I've been through very similar, fairly recently.
I exited my business of ten years due to a combination of slow death by stress, strategic disagreement, and brexit.
At the time of my departure, I owned 30% of the business - 30% was held by my cofounder, 40% by an investor.
Long story short I sold 20%, with the company buying back the equity using cash reserves at what we collectively agreed was a fair market value, and I still hold 10% of the business in class B stock with equal voting and dilution rights to class A.
How you play this is critical, and I followed a few ground rules to get myself the best possible deal.
1) be amiable. Parting on good terms inevitably works out better.
2) determine your own terms and state them clearly and concisely.
3) make those terms realistic. Don't shoot for the moon, put yourself in the shoes of the guys who are remaining and think about what you would accept on their side of the table.
4) don't be shy. If what you've determined is genuinely fair, stick to your guns.
5) if you haven't, sit down with the other stakeholders and be frank.
6) consider your tax implications. In the U.K., it's critical to retain voting rights if you want entrepreneurs relief and still have a stake in the company. Ymmv.
7) avoid lawyers. They (particularly with a fairly small transaction) will gobble up an awful lot. The company should pay your minimal legal fees and transfer duty.
8) be prepared to walk away with nothing, or to leave things in a deadlock. They'll have to make a move as a major absentee voting shareholder is what we call an embuggerance.
Of course, all of this depends on the particulars of your contract and articles. I ensured, when the investor came on board 6 years in, that I held some power cards (tag/drag/pre-empt/tribunal/arbitration) which discouraged untoward behaviour on the other principals' parts.
That all said, consider your position - you want to leave as you've lost faith but you want to retain equity - you'll need a justification as to why you want to retain that. In my case I downplayed my disagreement over strategy and emphasised my personal needs, hence they agreed to me retaining some stock.
Good luck.