Business And Shares

[CCCP]

I am asking this on behalf on my Thai friend who has a 10% share in a business. His 3 cousins between them own 80%, with the other 10% to a employee.

For whatever reason the cousins have been pushing him out, despite the fact the he was the one who created the business and has made it grow to something quite succesful. The cousins were there just for the investment.

Pressuming everything was done legally which he informed me was, where does he stand with regards to the 10% share. His input wasn't cash, but the knowledge of the business and running it. It seems now that the business has taken off, they want him out.

Because of the family ties he's ins't sure what to do. I said he shouldn't let them walk all over him but he is not sure if he should chase it up.

Should he get a lawyer involved?

Edited May 28, 2008 by CCCP

[LaoPo]

I am asking this on behalf on my Thai friend who has a 10% share in a business. His 3 cousins between them own 80%, with the other 10% to a employee.

For whatever reason the cousins have been pushing him out, despite the fact the he was the one who created the business and has made it grow to something quite succesful. The cousins were there just for the investment.

Pressuming everything was done legally which he informed me was, where does he stand with regards to the 10% share. His input wasn't cash, but the knowledge of the business and running it. It seems now that the business has taken off, they want him out.

Because of the family ties he's ins't sure what to do. I said he shouldn't let them walk all over him but he is not sure if he should chase it up.

Should he get a lawyer involved?

This kind of family ties is always very difficult. In fact he has not a very strong case if the 'paperwork' wasn't properly organized in terms of voting rights.

They have complete control of the shares and there's not much he can do. Maybe a lawyer will tell your friend he can do something but in fact he will only send bills...

The problem he created himself in the first place (understandable though) was that he had a very good idea, did the sales but wasn't able to come up with the money in the start up and sold his 'soul'....his 'baby' if you wish, too cheap to his cousins who probably saw the opportunities and offered him a lousy 10%.

Sharks.... and not real nice family members.

Advice ?

Since the idea is/was very good...start all over but in a different way; better protected.

Normally, if a business idea is very good, the 'inventor'/entrepreneur asks/offer money/shares with venture capitalists (or family/friends); it depends on many factors but a share, varying from 10>>>40 or more % is common for capital investors, leaving the majority of the shares to the inventor/entrepreneur, not the way around like with your friend.

After all the inventor/entrepreneur has to do all the work and it depends on the initial agreements if he gets/got a salary or not.

Also, venture capitalists WANT the entrepreneur to stay because without him they will certainly lose all their money, meaning that the capitalists KNOW they need the man for future success.

In this case the cousins probably knew about his venture and saw success coming before he did himself...

They got him by the balls....

Good luck to him.

PS: how much money are we talking about ?

LaoPo

Edited May 28, 2008 by LaoPo

[Moonfruit]

Great post Loa, very informative.

Your friend does however hold 10% of the shares and hence is entitled to a buyout equaling the value of those shares, voting rights or not.

It may be an opportunity for him to get some cash out of the cousins so he can go ahead and start over using the guidelines that Lao highlights above. Basically, getting what he can before going and doing it again, only better next time by learning from his mistakes and making it moresuccessful than the first.

[CCCP]

I am asking this on behalf on my Thai friend who has a 10% share in a business. His 3 cousins between them own 80%, with the other 10% to a employee.

For whatever reason the cousins have been pushing him out, despite the fact the he was the one who created the business and has made it grow to something quite succesful. The cousins were there just for the investment.

Pressuming everything was done legally which he informed me was, where does he stand with regards to the 10% share. His input wasn't cash, but the knowledge of the business and running it. It seems now that the business has taken off, they want him out.

Because of the family ties he's ins't sure what to do. I said he shouldn't let them walk all over him but he is not sure if he should chase it up.

Should he get a lawyer involved?

Funny how things turn out.

My friend left and was offered a job elsewhere. In the meantime the majority of his old clients have contacted him as they want to do business with him directly, and not with his old company. Apparently some of the clients are rufusing to pay because the service has also dropped.

It appears the cousins thought they could do the job themselves. Obviously the relationship between the families now is none excistent.

At least his hard work is paying off, or starting too.

This kind of family ties is always very difficult. In fact he has not a very strong case if the 'paperwork' wasn't properly organized in terms of voting rights.

They have complete control of the shares and there's not much he can do. Maybe a lawyer will tell your friend he can do something but in fact he will only send bills...

The problem he created himself in the first place (understandable though) was that he had a very good idea, did the sales but wasn't able to come up with the money in the start up and sold his 'soul'....his 'baby' if you wish, too cheap to his cousins who probably saw the opportunities and offered him a lousy 10%.

Sharks.... and not real nice family members.

Advice ?

Since the idea is/was very good...start all over but in a different way; better protected.

Normally, if a business idea is very good, the 'inventor'/entrepreneur asks/offer money/shares with venture capitalists (or family/friends); it depends on many factors but a share, varying from 10>>>40 or more % is common for capital investors, leaving the majority of the shares to the inventor/entrepreneur, not the way around like with your friend.

After all the inventor/entrepreneur has to do all the work and it depends on the initial agreements if he gets/got a salary or not.

Also, venture capitalists WANT the entrepreneur to stay because without him they will certainly lose all their money, meaning that the capitalists KNOW they need the man for future success.

In this case the cousins probably knew about his venture and saw success coming before he did himself...

They got him by the balls....

Good luck to him.

PS: how much money are we talking about ?

LaoPo

[LaoPo]

I am asking this on behalf on my Thai friend who has a 10% share in a business. His 3 cousins between them own 80%, with the other 10% to a employee.

For whatever reason the cousins have been pushing him out, despite the fact the he was the one who created the business and has made it grow to something quite succesful. The cousins were there just for the investment.

Pressuming everything was done legally which he informed me was, where does he stand with regards to the 10% share. His input wasn't cash, but the knowledge of the business and running it. It seems now that the business has taken off, they want him out.

Because of the family ties he's ins't sure what to do. I said he shouldn't let them walk all over him but he is not sure if he should chase it up.

Should he get a lawyer involved?

Funny how things turn out.

My friend left and was offered a job elsewhere. In the meantime the majority of his old clients have contacted him as they want to do business with him directly, and not with his old company. Apparently some of the clients are rufusing to pay because the service has also dropped.

It appears the cousins thought they could do the job themselves. Obviously the relationship between the families now is none excistent.

At least his hard work is paying off, or starting too.

This kind of family ties is always very difficult. In fact he has not a very strong case if the 'paperwork' wasn't properly organized in terms of voting rights.

They have complete control of the shares and there's not much he can do. Maybe a lawyer will tell your friend he can do something but in fact he will only send bills...

The problem he created himself in the first place (understandable though) was that he had a very good idea, did the sales but wasn't able to come up with the money in the start up and sold his 'soul'....his 'baby' if you wish, too cheap to his cousins who probably saw the opportunities and offered him a lousy 10%.

Sharks.... and not real nice family members.

Advice ?

Since the idea is/was very good...start all over but in a different way; better protected.

Normally, if a business idea is very good, the 'inventor'/entrepreneur asks/offer money/shares with venture capitalists (or family/friends); it depends on many factors but a share, varying from 10>>>40 or more % is common for capital investors, leaving the majority of the shares to the inventor/entrepreneur, not the way around like with your friend.

After all the inventor/entrepreneur has to do all the work and it depends on the initial agreements if he gets/got a salary or not.

Also, venture capitalists WANT the entrepreneur to stay because without him they will certainly lose all their money, meaning that the capitalists KNOW they need the man for future success.

In this case the cousins probably knew about his venture and saw success coming before he did himself...

They got him by the balls....

Good luck to him.

PS: how much money are we talking about ?

LaoPo

Your answer was difficult to find but let me rephrase it here:

"Funny how things turn out.

My friend left and was offered a job elsewhere. In the meantime the majority of his old clients have contacted him as they want to do business with him directly, and not with his old company. Apparently some of the clients are rufusing to pay because the service has also dropped.

It appears the cousins thought they could do the job themselves. Obviously the relationship between the families now is none excistent.

At least his hard work is paying off, or starting too."

Good for him and it once more proved that greed (by his cousins) didn't pay off !!!

My suggestion however is that he talks (again) to the people who offered him a job to form a kind of sub-company (no matter how small) in a way that HE controls a majority of the shares.

If not, he will end up, being a 'worker' instead of his own boss.

LaoPo