issues withe CEO/co-founder

[kimosavi]

What is the name of your state (only U.S. law)? IL

Hi, we opened a company (C Corp) back in 2012 (3 co-founders with equal shares). We all set out the responsibilities and roles (mostly verbal) but the job titles on paper.

the CEO was responsible for growing the business and me (COO) and the (CTO) to work on the tech and operations. The CEO has not even got us one client or performed any of the roles or tasks that we have all agreed he should do, even arranging filing taxes, which at this point we don't even know if he did or not, he is not telling us or showing proof.

We have all agreed to pay $3K each to capitalize and pay for company debt (I have email confirmation from him) but we are not getting any responses from him anymore.

The whole company does not wants to work with him anymore and the CTO and myself have agreed to remove him from the company.

We hold majority votes so is my understanding we can fire him as the CEO. But what about the shares? does he get to keep them? even if he hasn't done any of the tasks or roles he was set to do?

and what about the $3K? is there any legal process to force him to pay to what he agreed?

Thank you in advance!

 

[kimosavi]

Update.

The CEO paid this weekend the $3K but still not responsive to any communication we extend to him.

We will still want to proceed to remove him as CEO and if possible for him to give/sell or renounce to his shares.

Thanks.

 

[tranquility]

Unless your articles of incorporation allow for buying out a founder's shares if he is no longer employed there, you cannot force someone to sell or give you their property.

 

[kimosavi]

Unless your articles of incorporation allow for buying out a founder's shares if he is no longer employed there, you cannot force someone to sell or give you their property.

Thank you tranquility.

you are right and it is the case, it has to be a personal decision and we (co-founder) have first option to buy if he wants to sell, if we don't want to buy then he can sell to others. I was just wondering if there is a way that you will lose your shares for not performing your duty but you are right, is his property. you cannot lose your home for not paying the cable bill.

thanks.

 

[latigo]

What is the name of your state (only U.S. law)? IL

Hi, we opened a company (C Corp) back in 2012 (3 co-founders with equal shares). We all set out the responsibilities and roles (mostly verbal) but the job titles on paper.

the CEO was responsible for growing the business and me (COO) and the (CTO) to work on the tech and operations. The CEO has not even got us one client or performed any of the roles or tasks that we have all agreed he should do, even arranging filing taxes, which at this point we don't even know if he did or not, he is not telling us or showing proof.

We have all agreed to pay $3K each to capitalize and pay for company debt (I have email confirmation from him) but we are not getting any responses from him anymore.

The whole company does not wants to work with him anymore and the CTO and myself have agreed to remove him from the company.

We hold majority votes so is my understanding we can fire him as the CEO. But what about the shares? does he get to keep them? even if he hasn't done any of the tasks or roles he was set to do?

and what about the $3K? is there any legal process to force him to pay to what he agreed?

Thank you in advance!

Yes, there is a legal means to force the bad guy "to pay what he agreed".

You will find it in the Illinois Business Corporation Act at Section 6.20 of Chapter 32 (805 ILCS 5/6.20) in part as follows:

"Unless otherwise provided in the subscription agreement, subscriptions for shares, whether made before or after the organization of a corporation, shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors."

"In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation."

_____________

The board must first make a formal written call or demand for payment of the stock as provided in the subscription agreement and/or pre-incorporation agreement and/or By-Laws. If the demand is not met, then he must be sued in the name of the corporation. If judgment is obtained and he still balks, levy execution against his stock.

A little bit awkward with him still sitting at the head of table and calling the shots, however. SO, first a special meeting of the board should be called to replace him as head honcho.
___________________________

But I'll make what I believe is a safe bet. You wouldn't do it!

 

[Zigner]

Yes, there is a legal means to force the bad guy "to pay what he agreed".

You will find it in the Illinois Business Corporation Act at Section 6.20 of Chapter 32 (805 ILCS 5/6.20) in part as follows:

"Unless otherwise provided in the subscription agreement, subscriptions for shares, whether made before or after the organization of a corporation, shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors."

"In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation."

_____________

The board must first make a formal written call or demand for payment of the stock as provided in the subscription agreement and/or pre-incorporation agreement and/or By-Laws. If the demand is not met, then he must be sued in the name of the corporation. If judgment is obtained and he still balks, levy execution against his stock.

A little bit awkward with him still sitting at the head of table and calling the shots, however. SO, first a special meeting of the board should be called to replace him as head honcho.
___________________________

But I'll make what I believe is a safe bet. You wouldn't do it!

Psstt - he paid it already.

 

[kimosavi]

Thank you all for the replies, this information is very useful.

At this point the company debts are paid but is making no money, so we are also considering the possibility of closing the company, think is a better route, I can always start a new company without the bad guy.

Thanks again.