VIC Company Directors Dispute - Getting Screwed?

[Marcusg]

A friend and I are Company Directors in a company. It is setup so that we profit split 49% for me 51% for her. We have a standard constitution covering the business activities.

I’m a website developer and have worked for free for the past 3 years developing a website from scratch from my friend’s initial idea. The site is in the position now to start generating income.

She has a new boyfriend and is getting married. I've just received an email wanting me to ‘sell out’ my stake of the business to her for my financial costs only. I would retain a 10% stake.

She has the trademark to the site’s name.

I have sole access to the website hosting and have created all the content, processes, database and design work for the site.

Our financial costs are funded from personal finances. The business has no funds.

My financial costs: $2000.

Her financial costs: $3000.

She is a solicitor.

While my actual costs are only $2000, my time involved is closer to $60,000.

Issues:
I don’t want the 10% stake. I want a clean break and remove myself as a company director. Can she sue me for not wanting to accept her offer of 10%?

I want to ask for $5000. She offered this amount 18 months ago as a payment of good will, but I turned her down. Is it still acceptable to ask?

Upon payment I will hand over the website and all usernames and passwords. While I’m not happy, I want to keep the separation professional.

If she does not comply what legal recourse is available?

I think she needs to start paying for the hosting (monthly fee US $25) now as a first step.

I also want a professional indemnity insurance document indemnifying me from any future website updates by other developers.

What else should I be doing?

Thank you for your time in this matter

 

[Rod]

Do you have a shareholders agreement? If yes, what does it say about the sale of the shares?

Is there anything in the company constitution that says anything about the sale of shares?

Can she sue me for not wanting to accept her offer of 10%?

Yes she can sue. Will she be successful? Unlikely. Check the constitution and shareholder agreement.

Is it still acceptable to ask?

Yes. But why would you? If the business is starting to make money are you undervaluing the business?

If she does not comply what legal recourse is available?

Is she doesn't comply with what? Don't understand the question.

I think she needs to start paying for the hosting (monthly fee US $25) now as a first step.

Why isn't the company already paying this cost?

What else should I be doing?

Getting fair value for your time, IP and future value of the business. And ensuring there is no non-compete clause unless she pays a premium for the privilege. You may also want to retain ownership of the web site code so you can re-use it in another business venture.

 

[Marcusg]

Do you have a shareholders agreement? If yes, what does it say about the sale of the shares?

Is there anything in the company constitution that says anything about the sale of shares?

No there is nothing about the sale of shares that I can find in the Constitution.

Why isn't the company already paying this cost?

The business is financed by by personal finances until such time the site starts making money.

I don't want to be in the business anymore anyway. I want out. I don't care about a fair value for my time or IP.

The biggest problem I have is that the website is not finished. It is in its basic form only and there is a lot more to do. I need an indemnity of some kind absolving me of both any website features not yet installed and any changes a future developer makes that impacts my code unexpectedly. My partner has really lost interest in the business and has not checked the website for the last few months. Is an indemnity appropriate, and if so, what is it called?

Thanks Rod

 

[Rod]

OK. Personally I'd just go with a director's resignation and a simple sale agreement that:

• Sells your share of the business.
• Ends your 'employment' in the business
• Mentions the website is incomplete and that the buyer accepts all responsibility for it as is.
• You are no longer responsible for anything to do with the business including website development, operability and maintenance

You are unlikely to get an indemnity with the buyer being a solicitor unless the indemnity is limited to specific matters.

 

[Marcusg]

Hi Rod,

Thanks again for the advice. Because the numbers are not huge here, and that fact that the website code is portable and can be easily re-used, it is more simple to get out now. I'm glad that this happened now, and not two years down the track when the business may be making making actual cash, and I'm asked to hand over part of my ownership for her new beau!