Legal Question in Business Law in California

I was approached by a foreign company to start a US entity in the same industry.

We were to use their technology and my contacts within the industry to build the company. I had 3 existing relationships which all 3 we ended up signing to a contract. For the first 3 months while building the company, I wasn't paid but was hired on by the foreign company as a contractor after the 3 months.

The president of the foreign company and myself put together the business models out of my apartment before getting an office. He even stayed in my house for a month while we built the company.

The president of the foreign company raised money for the US company based on one of the contracts I brought to the table prior to the company being formed.

We established a Delaware LLC that I later found out was just a shell for the foreign company to do business in the US.

The company is about to be acquired for a nice profit and the president of the foreign company is now telling me that I have no equity because I didn't invest any money. The valuation of the company is based on contracts I brought to the table and technology that was built for these deals.

I have email evidence of my contributions but didn't get anything in writing on equity. I was in charge of the US operations, built the US entity from the ground up, and even found the company that is acquiring us.

Do I have any legal ground to stand on?


Asked on 10/16/09, 1:38 pm

2 Answers from Attorneys

Not based on what you've told us so far. It sounds like there is more to it though. For example, who owns the LLC? Is it solely owned by the foreign company, or did you get shares in it when it was formed? Did you receive promises or represetations that you would be a part owner of the LLC or the foreign company? Do you have proof of those promises? Does your contract say anything about ownership?

If not, it seems like the president of the foreign company is a savvy businessman, and you are out of luck. There is nothing wrong with hiring talent to build a company without giving them a stake in the company. If you didn't bargain for and get an agreement or promise to receive an ownership interest in the company, you were just like any other employee or contractor who gets paid for their work in cash, not equity.

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Answered on 10/16/09, 1:58 pm
Bryan Becker Becker Attorneys

I am not as pessimistic as Mr. McCormick but much more background is necessary before advising you properly. A lot is at stake here, more than just money but your hard work. Hire an attorney to review and advise you of your options. If you would like to discuss, feel free to contact me.

Regards,

Bryan

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Answered on 10/16/09, 3:41 pm


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