contract-law business ownership equity
Software Developer in a Startup Company
<p>I'm a software developer who developed a SAAS (software as a service) system for a startup company. I can't provide any additional details into the company since it's under an NDA but they shouldn't be super relevant to my question. I've been working for awhile for pennies on the dollar with the promise of that scaling as we earn more clients. Currently, we retain the rights to half of the product since we were willing to work for so cheap. It's coming time now where we relinquish our ownership of the product in exchange for a small amount of equity. </p>

<p>My question is, what can we do that would prevent the owner of the company  from being able to create a new company and purchase their own company for $1 giving us practically nothing?</p>

<p>If I understand your question correctly:</p>

<ol>
<li>at present you own 50% of the IP in some software and a Company owned 100% by someone else owns the other 50%.</li>
<li>in the near future, you will sell your 50% ownership in the software to the company for an X% share of the company (where X% &lt; 50%) .</li>
<li>you are concerned that the majority shareholder will form a new company and buy the business of the existing company (including the software IP asset) for a nominal, non-commercial amount, thus ripping you off.</li>
</ol>

<p>If this is the situation:</p>

<ol>
<li>what were you thinking? Never, never, never go into a partnership with someone you don't trust. Of course, if you do trust them then there is no problem, is there.</li>
<li>They can't do this. The directors of a company are required to act in the interests of the shareholders as a <strong>whole</strong>. A scam like this is clearly not in the interest of the shareholders as a whole (and may even be fraud) and you could sue the directors personally.</li>
</ol>
