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Ask FLCORPLAWYER Your Own Question
Category: Business Law
Satisfied Customers: 4634
Experience:  23 Years business & securities law, NY and FL bars. SEC all states.
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I am an ex employee of a successful, privately held start up

Customer Question

I am an ex employee of a successful, privately held start up company that has grown profitable. I am vested with a block of ISO stock options. I bought and paid for my stock options within the required 30 days of my departure date. The company was funded with a combination of four different VC groups in the first (5) years. The company is now 10 years old and as far as I know the original funding groups are still in their investment positions.

As far as I know nothing has changed in the planned exit strategy of selling the company to an interested acquiring company. Since leaving the company several years ago, and having been verbally promised we stockholders would be getting, at least, an annual written update that would be sent to the group, I have yet to get any formal updates on the status of the company. I have been patient, but am now growing very concerned about the outcome.

As the expiration of the ISO plan is coming up in a year, I have been recently sending email written requests for that formal update to the CEO and CFO. Short of starting to call them directly on the telephone, I have yet to get any response.

My primary and secondary questions are: What legal obligations does the CFO/CEO have to me (all of us ISO stockholders) for communicating company status and future plans? If they have no legal responsibilities to communicate their plans to me/us, what potential problems could I generate for myself by formally making my requests directly the board of directors of this company - of which the CEO is the Chairman of Board of Directors?

Secondly, as the ISO plan expires in a year, what should I expect for the company to modify, or renew the plan to maintain continuity?

I want answers and believe I am entitled to get some from them. I am trying to assess the risk of my rattling the doors at the BOD level and what they could mean for my downside.
Submitted: 6 years ago.
Category: Business Law
Expert:  FLCORPLAWYER replied 6 years ago.


I'm unsure whether you currently have options, or have you exercised the options and actually been issued the stock?




Yes, I have the options. I purchased them and have been issued my certificates - all per the terms of the ISO plan instructions.


So you have option certificates but no actual issued shares of stock. If you have no stock, your rights are very limited. if you have stock, you have minority shareholder rights. unfortunately in what is basically still a private company that does not mean much. Make sure you convert your options according to their terms and in time. There is no downside to trying to communicate with the Board directly.


Well, as I paid for the stock and was issued my stock certificates, then I would say I have converted the actual option to buy the shares to the actual shares. The minority shareholder rights point is, I believe, correct. The "not meaning much part" is what I am trying to get to the bottom of.

Expert:  FLCORPLAWYER replied 6 years ago.
Since they are not cooperative you would have to sue them to open up the books. this is expensive and time consuming. Better to chisel away at them slowly.
Customer: replied 6 years ago.
Thank you,

This much I have known so far in my quest for a better answer that may not be there for me.

If I cannot get some answers here about exactly waht I am entitled to ask for - as far as accounting information, then I am off to the California and Delaware Dept of Corporations to find out what the complaint process is so that I understand it.

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