What is the name of your state (only U.S. law)? Georgia
I have 2 questions at the bottom that I would especially like addressed. I've got them marked.
Thanks for the time!
I'm watching an interesting situation develop that I would love to hear comment on. LLC Tech (2 guys) and SCorp Vision (1 guy) have worked together well since 2004, with LLC Tech providing the technical expertise and development/support of Software and SCorp Vision providing the business management, growth, sales and eventual sale the company to a larger player for a cash-out. SCorp Vision helped seal the deal with LLC Tech with talk of this last possibility. LLC Tech developed, with some scarce managerial support from SCorp Vision Guy, a product called The Software, which is
really cool and valuable for the industry.
The two groups worked on a handshake for three years, with LLC Tech bugging for something in writing for year 2. In Q1 year three, LLC Tech finally forced a Software Development Agreement on SCorp Vision. It's not that SCorp Vision Guy had been opposed to the agreement - he just never moved on it himself. This Agreement says that during development both companies have 50% ownership of the code, and that any sale/transfer or licensing of the software by either must be approved by both. Once someone agrees to pay for The Software, The Agreement says they form another LLC (NewCo) comprised by the
members of LLC Tech and the
shareholders of SCorp Vision owning 50% each. The 3-person board of directors will be made up of LLC Tech's 2 members and SCorp Vision's 1 guy.
LLC Tech has a trusting relationship with SCorp Vision Guy, but now that money is on the table, and a NewCo LLC is needed in order to receive that money, SCorp Vision guy wants a new
LLC Vision he formed and controls, but does not own 100% of (in order to "take some investment money to keep him going") and
LLC Tech to be 50-50 owners in NewCo LLC, instead of having the individuals be the owners.
This makes LLC Tech nervous, because they would have no ability to vet who might replace the actual physical people behind SCorp/LLC Vision if they get bought. Furthermore, then SCorp Vision would have gotten that "cash-out" without LLC Tech benefiting. This possibility is unacceptable to LLC Tech (their work is neccessarily front loaded, creating the product).
But in the agreement it says that the owners of NewCo will be the individuals. 1) Since you can't replace
people, they can just make all sales/transfers of ownership subject to board approval in NewCo's operating agreement, and that fixes this problem, right? Because then SCorp Vision would be forced to always appear to be looking out for all of their best interests.
LLC Tech has the right to deep-six the project per our Current Agreement, and is mentally prepared for that route. 2) But in fact, if SCorp Vision refuses to come to agreement over the individuals owning it (w/ restrictions on selling), thereby resulting in a deep-six of the project, then hasn't SCorp Vision killed the project by refusing to honor the terms of an already signed Agreement? Given that it was this
same Agreement that ratified the 50%-50% ownership of the code, would SCorp Vision's ownership of the code be in question?
3) What else am I not thinking of? What does LLC Tech have to be wary of if SCorp Vision is secretly only on his own side?
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