Corp Mysteriously Closes & Reopens Under New Name

[RobL]

Corp Closes & Reopens Under New Name

What is the name of your state? MT

Myself and another collegue worked for a MT S-Corp. As part of our benefits package we were offered stock options (most of which had been exercised, with proper paperwork)

After nearly 5 years of employment, because of difficult working conditions (we were putting in 14-16 hours a day) we were "promised" more ownership. As a result, the majority stock holder issued written commitments to my colleague and I that amounted to 35% ownership between the two of us.

After the committment, and through a series of month-long meetings, the majority stockholder announced that he was "leaving the industry" and took steps to rapidly close the business, declaring that he was going to file bankruptcy for the company.

Two years later, we have discovered that he did not file, and has instead created an LLC and has used the assets of the prevous S-Corp to develop another product that is exactly the same as before, in the same industry, and he is now aggressvely selling it.

My collegue and I feel like the previous majority stock holder may have taken this approach to get rid of us and our ownership in the company, he is now doing the same business with the same product (slightly modified) that we had ownership of.

Should we pursue this?

TIA,
RobL

 

[seniorjudge]

What is the name of your state? MT

Myself and another collegue worked for a MT S-Corp. As part of our benefits package we were offered stock options (most of which had been exercised, with proper paperwork)

After nearly 5 years of employment, because of difficult working conditions (we were putting in 14-16 hours a day) we were "promised" more ownership. As a result, the majority stock holder issued written commitments to my colleague and I that amounted to 35% ownership between the two of us.

After the committment, and through a series of month-long meetings, the majority stockholder announced that he was "leaving the industry" and took steps to rapidly close the business, declaring that he was going to file bankruptcy for the company.

Two years later, we have discovered that he did not file, and has instead created an LLC and has used the assets of the prevous S-Corp to develop another product that is exactly the same as before, in the same industry, and he is now aggressvely selling it.

My collegue and I feel like the previous majority stock holder may have taken this approach to get rid of us and our ownership in the company, he is now doing the same business with the same product (slightly modified) that we had ownership of.

Should we pursue this?

TIA,
RobL

Q: Should we pursue this?

A: How much (in dollars) would this be worth?

 

[RobL]

At time he closed the business, it was generating $750,000 /yr.

We have learned that he has retained most of the original customer base and is actively converting them to the "new" product.

This is a software company with a product that generates annual revenues from licenses, maintenace contracts, and related services and we had projected annual revenues to be in the 3 - 5 million dollar range in 5 years.

What bothers us is that he simply performed some strange manuevers and got rid of us, rehired old staff that did not have ownership, and so we have essentially lost an investment we planned to last into retirement (as long as the product is viable). Stockholders were not notified of any closing procedures, board meetings (if any) or otherwise. We learned of his activity from a sales email sent to a former client.

 

[seniorjudge]

Q: Should we pursue this?

A: How much (in dollars) would this be worth TO YOU?

 

[HomeGuru]

I say go after him.

 

[RobL]

I'm not exactly sure how to value that. Thinking of it simply, we had projected the company value to be $25 million after 5 years. If the growth continues as expected and it is then sold, it would represent $8 million.

I expect we would pursue yearly profits as well, which were projected to increase to $600K Net after 5 yrs., our portion being about $200K Net per year for as long as the company exists.

We talked often about a 10-year plan to grow and sell the business, using the numbers above I'd say it's worth $10 million between the two of us.

 

[seniorjudge]

I say go after him.

I also say go after him.

 

[HomeGuru]

Do we have a third person?

 

[RobL]

"Do you have a third person"

Can you please explain?