contract-law shareholders delaware
Is it normal to reverse transfer ownership during a funding round?
<p>Delaware Corp (for jurisdiction)</p>
<p>Got involved in an unfunded startup last year and we managed to strike pay dirt.  I'm the engineering side of the equation.  Got a request to return some of my shares yesterday because of the first round of financing.<a href="https://i.stack.imgur.com/1YS28.jpg" rel="nofollow noreferrer"><img src="https://i.stack.imgur.com/1YS28.jpg" alt="Transfer Wording" /></a></p>
<p>What seems off is that there is no explanation (in the document they want signed) saying this:  <a href="https://i.stack.imgur.com/NK1hP.png" rel="nofollow noreferrer"><img src="https://i.stack.imgur.com/NK1hP.png" alt="enter image description here" /></a></p>
<p>As an engineer, I would expect the &quot;outside&quot; assurances to be part of the document.  Is that normal?  Seems like the intent of the transfer should be expressed in the transfer doc.  The assurance that my 3% is unchanging isn't stated anywhere in the document and the reason for doing this isn't stated in the document either.  Based on current valuations, this transfer of shares is worth about $127,000.  Based on our current trajectory, this could have a zero or two added to the end of it in the next year.</p>
<p>The 2nd thing that bothers me is the blank page:
<a href="https://i.stack.imgur.com/HiE2l.png" rel="nofollow noreferrer"><img src="https://i.stack.imgur.com/HiE2l.png" alt="Blank page" /></a></p>
<p>Blank page reads like a blank check to me and it is followed by this signature page.  <a href="https://i.stack.imgur.com/wVrZi.png" rel="nofollow noreferrer"><img src="https://i.stack.imgur.com/wVrZi.png" alt="signature page" /></a></p>
<p>So, 4 questions:</p>
<ol>
<li>Is this normal or am I suspicious for good cause?</li>
<li>Shouldn't the reason for the transfer be in the document? (And shouldn't it be expressed as percentage ownership as of this date?)</li>
<li>Why the blank page?</li>
<li>What &quot;VALUE&quot; am I receiving for this?  No money is changing hands.</li>
</ol>
<p>I realize that as investors come on they can issue new shares and my percentage will decline, but this isn't a watering down, this is a refund of shares issued.</p>

<blockquote>
<p>Is this normal or am I suspicious for good cause?</p>
</blockquote>
<p>Obviously it would be a huge mistake to comply with, or agree to comply with, the request. An error like this would be impossible to <em>lawfully</em> reverse in court.</p>
<p>The request does not seem to be premised on a duty outlined in the Purchase Agreement or other agreements regarding the establishment/constitution of the corporation. Maybe it is, but the information provided so far does not purport that to be the case.</p>
<p>You are right in that external assurances typically are meaningless and not binding. A court would first look at the terms of the agreement. If the terms of the agreement are as conclusive as in this document, it will be unavailing to point to other records such as the message with the smiley.</p>
<blockquote>
<p>Shouldn't the reason for the transfer be in the document? (And shouldn't it be expressed as percentage ownership as of this date?)</p>
</blockquote>
<p>It is up to the parties --including you-- to determine what terms and how much information documents like this should have. If the document does not meet your requirements, you should not agree to it.</p>
<blockquote>
<p>What &quot;VALUE&quot; am I receiving for this? No money is changing hands.</p>
</blockquote>
<p>Apparently nothing. Even if falsely, the document establishes that you are doing the transfer &quot;<em>for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged</em>&quot;. Signing an agreement with that clause would defeat any and all claims about you actually not having received &quot;[sufficient,] good and valuable consideration&quot;.</p>
