0

Brief context is that I quit a startup with some vested shares (not options) that I have already paid taxes for. Their attorney is arguing that the shareholder's agreement allows them to buy back all my shares. They've made me an offer but one that allows them to pay me annually over the course of several years.

I feel this is a bad deal for me. If the company makes it that many years, the shares will be worth a lot more than what they're offering now. If the company goes under, they don't have to pay me. So I bear all the risks but none of the upside. However this is not about fairness, but rather what is legal.

Is the company allowed to take ownership of my shares without paying for all of it at once? I'd imagine if I sign a contract that states that, then it's legal. But I don't know if I an option not to sign the first deal they put in front of me.

Are there any laws or standards (in California) that mandates shares should be paid for within a timely fashion?

Improve this question
2
  • 1
    "Their attorney is arguing [...]". Their attorney can say anything, including blatantly false statements. That is what many in the legal "profession" do for the sake of profit, but what matters is what your contract says in this regard.
    – Iñaki Viggers
    Commented Nov 22, 2019 at 10:58
  • If the money involved is significant then you should hire your own lawyer.
    – Paul Johnson
    Commented Dec 23, 2019 at 12:27

1 Answer 1

Reset to default
2

Is the company allowed to take ownership of my shares without paying for all of it at once?

Yes. Just like the company can take ownership of anything they buy on credit.

As a creditor, you would rank ahead of shareholders in any insolvency proceedings but while first shot at nothing is better than second shot at nothing you still end up with nothing.

I'd imagine if I sign a contract that states that, then it's legal.

They are referring to a shareholders’ agreement so it’s quite likely you have already signed a contract. If you have then that contract needs to be followed - it may allow payment over time and it may require you to accept an offer that’s in line with the valuation method.

Are there any laws or standards (in California) that mandates shares should be paid for within a timely fashion?

If a contract is silent, payment must be made within a reasonable time.

Further, there may be specific maximum payment terms for certain transactions or within certain industries, however, share transactions in private companies aren’t typically the type that attracts government regulation.

Aside from that, parties can agree any terms they like. After all, you typically pay back a home loan over 30 years. 999 year leases are not unknown.

Improve this answer
0

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .