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Ask HN: Company imploding; customers at risk; hostile partner
HN: I'm in a bind. I've got a 2 year old company that's falling apart (not profitable, out of money). The CEO, some employees, I own 49.5% together, and the "money" partner owns 50.5%. The partner has taken over financial operations, as he owns the bank account. He's stopped paying most employees and arbitrarily pays vendors.
The problem: We provide critical IT services to companies which service thousands of end users. Some of which include hospitals and police stations. Our service powers a lot of day-to-day stuff. I simply cannot just walk away or shut it down without helping the customers. I'm not exaggerating to say there could be a public safety risk in some cases.
We should have gone out of business a month or two ago, but I personally put in cash to help keep some things floating and make critical payments. I promised every employee I'd find a way to personally pay them if the company didn't.
I want to email customers right now, and let them know the situation. But the partner isn't replying in a useful manner. I told him in no uncertain terms, in October, we'd have to shutdown without more funding. (Fatal Pinch, how appropriate.)
I was thinking of writing customers and CC'ing the partner. Something to the effect of "The entire technical team of <company> has resigned. <Partner> is available if you have any questions. And remember, you can export your data at portal/mydata.". Does that put me at risk?
On a semi-related note, a couple of customers are a custom job, and they'd follow me even if I don't solicit them. And if we just shut down, even with a month's notice, they could easily go out of business. How do I help them without making it look like I'm trying to steal a contract? Just drop them a line saying I now work for <othercompany>?
What should I do?
- RoboCrapper 12y agoTalk to an attorney. Some of the options you mentioned could come back to bite you legally. I'd start there.
- nandemo 12y agoAgreed. That said, IANAL but: > He's stopped paying most employees and arbitrarily pays vendors. That's questionable, and probably illegal. In many jurisdictions, your company will have to pay fines for late salaries. Also, in case of bankruptcy, salaries take precedence over debt and payments to vendors. Even if your company hasn't entered bankruptcy yet, these payments will be scrutinized. So, besides the obvious moral issue, paying vendors before paying the salaries makes no financial sense. > I promised every employee I'd find a way to personally pay them if the company didn't. Why? It sounds like you're volunteering to be the fall guy.
- screwed_company 12y agoWell I felt I had no option. Everyone was nervous, and I couldn't have everyone just quit on the spot. I figured the few grand it'd take to pay a month of salaries, in the big picture, is only small amount compared to what I've lost. Of course, we'll sue and try to get the company to pay as much as possible.
- davismwfl 12y agoTalk to an attorney. Also, if you are considered critical to any public safety systems your contracts likely have clauses in there that could make life really bad for everyone if you don't give them enough warning to your situation. Including forced insolvency/receivership, loss of investment, barring future contracts for named partners etc. Law enforcement has been way more aggressive about these types of clauses on contracts lately, but I have been involved a lot in Public Safety EMS/Fire and they have these too.
- screwed_company 12y agoYeah I definitely want to give them enough time. To the point of I'll personally pay for a few servers and field support calls myself for an extra month, if I have to. Good points though, I will make this extra clear to my partner so he understands the gravity of the situation. Gonna call my lawyer first thing tomorrow.
- smileysteve 12y agoDon't CC the partner, that's just passive aggressive. You can email your partner that you need (and feel an ethical obligation) to inform customers and employees asap, give him 24 hours to respond if he might have input to better the wording. Especially encourage a plan for your "public safety risk" customers. Also, as you might be personally liable for employees salaries at this point, let them know asap.
- screwed_company 12y agoI only meant to CC him to make it clear I'm being transparent in how it's being handled. So he cannot claim he wasn't involved or didn't know or ... whatever complaint he may come up with. I'll email him tonight and give him a day to object. I'm not sure what to do if he does object, as there's no real other option at this point though. We've laid off most people already and have only 4 people left, all of which are aware of the situation.
- mcv 12y agoWhat does your lawyer say about all this? I really hope you've already spoken to one those two months ago. If you haven't, you're a fool and you should talk to a lawyer right now. If you have, what advice from random internet people do you need on top of the legal advice from your lawyer? It's important to realize that you are not the company. The company has stopped paying salaries, so it is already bankrupt. Another thing I'm wondering is: if you have such important customers, why is the company not profitable?
- screwed_company 12y agoLawyer hasn't been super helpful, mostly focused on lawsuits we've filed. Random Internet people on HN sometimes have remarkably keen insights. Though after sleeping on what I've written, it seems more and more clear that there's nothing real special about this situation. Perhaps I panicked.