Is holding the shares a condition of working there? Cause I'd rather sell them and diversify. I don't want the risk of the company going under to cost me my salary _and_ my investments.
With my own money I purchased approximately $15k in shares over the course of 8 years out of a 13 year tenure. Company was purchased by private equity. The CEO lost his crackers, I left, and it took the company 4 months to send me a first right of refusal with the value at $30k. Within that agreement, I had to sign away holding the company liable for anything and never threaten to sue — this is after the CEO torpedoed a job offer of mine, said some racist things, and sent me a cease and desist for a former customer calling me about a job offer.
In any event, I still own the shares. I wish I didn’t because it would have been a cleaner break without a non-compete. But, I’m stuck… don’t want to sign away rights for what is my own money. Just holding onto them to see what happens as any legal fees outweigh what they are worth.
I'd be interested in what that intent to sell stuff looks like. Do I have to specify how many shares I intend to sell and when I intend to sell them? Can I change my mind about selling them down the line?
It sounds like you own a contractually agreed upon amount of shares. Since it's not an employment contract but ownership you can just walk away and keep all your shares until you or the company dies. If they want you out they can buy your shares. But otherwise there is no problem with keeping the shares and walking away.
Before I had to fight for my legal rights a few times I always considered agreement more important than legal state. Don't do that. People will exploit that and give you much less than they owe you or ask much more than you owe them. Focus on your legal right first. You wouldn't give them your car or smartphone as a gift, right? Then don't just gift them your shares.
It sounds like there is no reason to sell your shares before the company gets more funding, which should also increase the value of your shares.
If you don't have a written agreement about the shares take whatever you can as fast as possible.
Based on the $, I guess you are in the US, but in which state is your company registered? Every state has different laws that protect minority shareholders. Often, as minority shareholder, you are protected by law and you rarely have to sell your shares, if you don't want to. BUT as the legal system goes - and it is very complex in the US - there are more exceptions and loopholes than there are rules. You need to know your share agreement and all provisions as well as your state's law. Depending on the state and the form of the acquisition, certain states like Delaware and Texas allow it that minority shareholders can be forced out of the company (https://smallbusiness.chron.com/force-shareholder-sell-stock...).
Normally, you should first talk to the majority shareholders. Then talk to management, because they only act on behalf of the majority shareholder (I assume they are the same in your case). You could mention that it is your right to know. If they are still not transparent, try talking to a lawyer or somebody that you know has a similar contract in the same state and industry as you.
FYI: I am not a lawyer and this is no legal advice :)
In most cases where I have been given company stocks as part of compensation, I usually sell them as soon as I can. Depending on your role in the company you are often very restricted about how much you can sell and when. There are limited trading windows where you can legally sell and any inside information may prevent it even then. I’d rather have my money in some other stock where I have more freedom to trade.
Generally I wouldn't want to, but one possible reason is to take some money off the table. Just sell part (non-controlling) of your stake to have FU money personally. You don't want to sell the company, but you might want the life-changing amount of money that says you don't ever have to work again. That can be done by selling part of the company to another investor.
To be clear, you as the shareowner can't legally do this. The company took the decision to be publicly listed in the US, and one of the consequences of that is that shareholders can only buy and sell their stock in accordance with the rules of the exchanges and the SEC. It's not normally a big downside: trading halts are rare and short.
I did this exact thing last year, so a couple of things to be aware of. Firstly, many companies will not allow you to sell the shares to another party without their permission. You can talk to them about this but realistically, unless they generally allow this, they are unlikely to make an exception for you since it sets a precedent within the company, but you can try. Might be good to talk to a lawyer about this. Secondly, by exercising you will very probably expose yourself to Alternative Minimum Tax (AMT). If you don't know what this is, look it up as this can be VERY expensive. So, before doing any of this I would really talk to an accountant and possibly to a lawyer.
You might not be allowed to sell the shares per an insider trading policy or per a disclosure policy ("CEO of XYZ dumped 50% of their shares" looks way worse than "CEO of XYZ borrowed $25MM to build a luxury house.")
You might not want to sell shares that you've held 306 days, preferring to hold them an additional 2 months to get long-term capital gains treatment on them.
You might not want to take capital gains (even if long-term) on this year's income tax. Maybe you want to defer it to January; maybe you want to defer it to a later year when you expect to have a lower capital gains bracket or when you expect to be able to avoid the Obamacare surtax on investment income (via repeal or via lower AGI)
You might not want to sell shares if the margin loan rate is lower than your expectation for growth of the shares.
Check your stock agreement. I worked somewhere it didn't just grant first right of refusal, but the company had to _approve any sale_. In practice, they approved almost no sales, so this was a ban on selling shares before IPO.
Hire an attorney (or several) for a couple of hours to read through your agreements.
The shareholders agreement, even if 'boilerplate', may only give the company the right of first refusal on the sale of shares. Even if unauthorized sales are completely disallowed, if you find an interested buyer there are still ways to craft a legal agreement where you for all practical purposes have 'sold' the shares.
But if the company isn't very successful, there may not be any investor interest, which would make the legal details pretty irrelevant.
I'd recommend getting an attorney to read over your agreements, and also try and gauge investor interest by listing your shares on one of the secondary market marketplaces.
I've been with this company now just close to 4 years, we have raised double digit millions and are not immediately going to sell the company; and I am not planning on leaving.
I am wondering if there is any reason that I would purchase the shares now or just wait until we either sell or I leave?
They already had shares that scheduled to sell but decided not to execute. It seems like the advice I always got from my company's legal department when I asked if it was ok to something: don't do it.
If your company is actually growing, you should not sell shares. They will be worth more later and the optics are bad. Much better to adjust your salary/bonus to address personal cashflow issues.
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