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In the contract it says at-will employment, so we can end his contract. We've asked, over period of 2+ years about the status of work, his availability. When I

In the contract it says at-will employment, so we can end his contract. We've asked, over period of 2+ years about the status of work, his availability. When I have kept asking now for 3 months what the status of work is, if he can upload work done and share it with us so we can evaluate where we are, the response is 'there is nothing to share until it is done', that he has other responsibilities with other work etc, that he's busy and doesn't have time. No idea when he will finish it. How can we evaluate his shares and give him an offer? what if he refuses?

ano-ther 2y ago
Would ask myself these questions: Can he actually stir trouble with the 5%? His initial stake was worth $50k. How much has the company value changed during his incompetence? Is there anything else that can motivate him (such as a “left by mutual agreement” clause)? How much would that be worth for you? Does the investor have any advice or can support? If you offer a lower amount than 50, will that hamper your next financing round? Can such a deal be made confidentially?
hluska 2y ago
Why have you let it go for so long? This isn’t a new issue and it’s been going on for a long time. What does the CTO have? There has to be something because otherwise there’s no reason this should have festered for so long. Fundamentally, you’re a minority shareholder who has taken cash down to zero while waiting on someone who has never delivered anything. If the CTO has an immense amount of talent, that might be a reasonable reason to keep them employed. But if the CTO has different kinds of leverage over you and/or the patent, it could become a problem. It would be worth spending a bit of time thinking that over. You’ll learn a lot for the next time you start a company. And in this case, you may be adding to your strategy to get rid of the CTO. Have you spoken with a lawyer about your potential liability? If not, you should likely delete this thread, talk to an attorney and if you repost this, you should only include the information she tells you to include. As well, you sold 75% of a million dollar company for 1/3 of the value. Is there a reason for that? For example, if you’re close friends with the investor you and the investor may be able to figure out a way to get the patent, defend it from the CTO and roll out a totally new company.
ryandrake 2y ago
One solution to this, if you would have thought about it ahead of time while writing his shareholder's agreement, might have been a Shotgun Clause[1]. "The shareholder triggering the clause offers to buy the shares of the others at a specific price per share. The other shareholder(s) must then either accept the offer and sell their shares, or buy the triggering shareholders' shares at that same price." So the company would offer to buy the CTO's shares at a certain price, but if the CTO refuses, he must instead buy the rest (95%) of the company at that same price. A good way to very carefully decide a fair buyout price for the guy. 1: https://en.wikipedia.org/wiki/Shotgun_clause https://en.wikipedia.org/wiki/Shotgun_clause

ano-ther 2y ago

Would ask myself these questions: Can he actually stir trouble with the 5%? His initial stake was worth $50k. How much has the company value changed during his incompetence? Is there anything else that can motivate him (such as a “left by mutual agreement” clause)? How much would that be worth for you? Does the investor have any advice or can support? If you offer a lower amount than 50, will that hamper your next financing round? Can such a deal be made confidentially?

hluska 2y ago

Why have you let it go for so long? This isn’t a new issue and it’s been going on for a long time. What does the CTO have? There has to be something because otherwise there’s no reason this should have festered for so long. Fundamentally, you’re a minority shareholder who has taken cash down to zero while waiting on someone who has never delivered anything. If the CTO has an immense amount of talent, that might be a reasonable reason to keep them employed. But if the CTO has different kinds of leverage over you and/or the patent, it could become a problem. It would be worth spending a bit of time thinking that over. You’ll learn a lot for the next time you start a company. And in this case, you may be adding to your strategy to get rid of the CTO. Have you spoken with a lawyer about your potential liability? If not, you should likely delete this thread, talk to an attorney and if you repost this, you should only include the information she tells you to include. As well, you sold 75% of a million dollar company for 1/3 of the value. Is there a reason for that? For example, if you’re close friends with the investor you and the investor may be able to figure out a way to get the patent, defend it from the CTO and roll out a totally new company.

ryandrake 2y ago

One solution to this, if you would have thought about it ahead of time while writing his shareholder's agreement, might have been a Shotgun Clause[1]. "The shareholder triggering the clause offers to buy the shares of the others at a specific price per share. The other shareholder(s) must then either accept the offer and sell their shares, or buy the triggering shareholders' shares at that same price." So the company would offer to buy the CTO's shares at a certain price, but if the CTO refuses, he must instead buy the rest (95%) of the company at that same price. A good way to very carefully decide a fair buyout price for the guy. 1: https://en.wikipedia.org/wiki/Shotgun_clause https://en.wikipedia.org/wiki/Shotgun_clause