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I receive a % of 'capital raised by a startup company'. They've received a loan from shareholder. Is that raised $

Seattle, WA |

I cancelled my employment contract in exchange for a deposit and a % of future raised $.
The CEO put some monies in and says that its a loan and not subject to our agreement.
The agreement says any monies 'raised'.

The actual document wording is: xxx will receive an additional $x0,000 to be paid from future Webshoz capital raises as follows: Commencing with the first $1.00 raised and effective from the date that the first $1.00 of the new round is raised, xxx will receive: (i) 15% to be paid monthly on all money raised during the month. Payments will continue until the full amount of $x0,000 has been paid.

Attorney Answers 4

Posted

Without seeing your agreement it is impossible to know. Now, you have a few interesting things going on. This arrangement may violate employment laws. Second, this may violate broker laws and may expose the company to various legal issues.

I strongly recommend that you speak with an attorney as soon as possible.

This answer is for informational purposes only and is not legal advice regarding your question and does not establish an attorney-client relationship.

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Posted

Unfortunately, it's not possible to give you a definitive answer without looking at (a) the exact language of your contract, and (b) the paperwork/agreement documenting the CEO's cash contribution/loan.

It is certainly possible that this contribution could count as capital raised according to your contract. But without looking at the contract, I'm afraid I can't be of more help.

You might consider having an attorney review these documents for you, so that you can be informed as to whether or not you are contractually entitled to a percent of the CEO's contribution.

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Posted

Are you involved in raising the money? If so, it sounds like you are working as a broker/dealer subject to regulation by the SEC and your state securities regulators. Since you are no longer an employee, I think this is a bigger legal problem for you that whether you can win this argument with the CEO. (No employee wins an argument with the CEO.) You or your employer should consult a securities lawyer on the broker/dealer side.

DISCLAIMER—This answer is for informational purposes only under the AVVO system, its terms and conditions. It is not intended as specific legal advice regarding your question. The answer could be different if all the facts were known. This answer does not establish an attorney client relationship. I am admitted only in California. (Bryant) Keith Martin sbbizlaw.com

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Posted

Putting aside the securities issues raised by Keith (which are very real), it is unclear here whether that was some sort of severance for which you did no work or a form of compensation for services continuing to be rendered.

While it is true that someone needs to look at the contract, if it is to compensate you for services in raisng money rather than as a severance package, it is difficult to believe that you provided much service to the company when the CEO put it money. Certainly nothing you did had anything to do with his decision.

If it was really a form of severance or payoff on the contract, then it would be more likely IMHO that this percentage is owed to you. I agree with the others though, that an attorney would need to take a look at the agreement.

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