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I was asked to join a startup company with a buddy and his…

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I was asked to join...
I was asked to join a startup company with a buddy and his girlfriend. Consequently, there will be 3 partners. We want to split the company 1/3, 1/3, 1/3. Given their relationship they have controlling interest and voting rights in the company. We are in the process of forming a partnership agreement. What can I put in the bylaws to protect my shares from being bought out or being removed from the company. The company will have 2 managers me and my buddy. His girlfriend will not be a manger.
Submitted: 7 years ago.Category: Business Law
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12/5/2010
Business Lawyer: MShore Law, Attorney replied 7 years ago
MShore Law
MShore Law, Attorney
Category: Business Law
Satisfied Customers: 25,285
Experience: Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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Thank you for the post, you can put in the bylaws and in order to force the sale or liquidation of your interest there must be an agreement of all persons with voting interests in the company.
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Customer reply replied 7 years ago

We expect there to be investors in the future... Will this effect anything? I'm assuming will need something that will say i can buy pro-rata shares...

 

Would you be willing to expand on all the things that I should ask for in the bylaws to ensure that my 1/3 equity and voting rights is completely protected. Also, as it pertains to decision making because there are 2 managers will this allow me to block a decision if I think it would harm the company.

 

also, i want to make sure that my position as a manager is protected.... since they have 2/3 control can they simply remove me from being a manager... if so how can i protect myself

Business Lawyer: MShore Law, Attorney replied 7 years ago
Hello, having investors will change the equation because I assume you will want to reserve a portion of the company's shares for equity investors.

The bylaws should state that your interest and position as a manager cannot be liquidated or dissolved via vote, unless such vote is a unanimous vote for forced buy out or sale, except upon a judicial determination of incapacitation. The fact that there are two managers does not mean that the managers will make all decisions regarding ownership, the managers would presumably be in charge of managing the affairs of the business, but not the actual ownership of the business.

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Customer reply replied 7 years ago

yes i understand... the two of us are member managers. the third owner not being a manager

 

they want it set up where the company will have two phases... an intial stage (start up) and a second stage (operational)

 

I'm just very concerned given the nature of there relationship that they could decide to get rid of me at anytime....

 

it appears you are telling me I need to ask for this in the bylaws..." my interest and position as a manager cannot be dissolved via vote unless such a vote is unanimous for forced buyout or sale except upon judicial determination of incapacitation"

 

 

now does that mean if there is someone who wants to take over the company via merger. i can essentially block that because i have the right not to sell my shares and that right is protected by the clause above.... essentially if someone wants to buy the company or the company is going to be sold it must be unanimous or at least my shares are protected from forcibly being bought out. maybe another investor doesn't have this right... is this making any sense.... i promise to pay you soon just want to get all the facts i have a meeting tomorrow morning early

 

 

 

 

 

 

 

 

by the way this is a deleware corp.

 

 

Business Lawyer: MShore Law, Attorney replied 7 years ago
Hello, yes if someone wants to buy the company or the company is going to be sold it must be unanimous consent. This is what I am suggesting you request in your bylaws.
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Experience: Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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