HACKER Q&A
📣 rortaw2

In what scenario can a company legally remove your equity?


Hi!

I recently quitted a startup that I spent many years at. I was the first employee as engineer, and I own equity (not option). The management team has changed drastically over the years, and the tech that enabled the business is now considered a cost. The politics got overwhelming, which is why I quitted. The startup has made a few private rounds and added many members to the board. The management does not like tech at all. They offered a price for my shares, which I said no because of the low offer. And I received a message from the management saying my shares are restricted and subject to board cancelation.

I cannot tell if it is an unhappy/unreasonable threat message from the management or if it can actually be possible. In what scenario can a company legally remove your equity?

  👤 rokobobo Accepted Answer ✓
It all depends on the contract and the jurisdiction you’re in. Definitely get a lawyer that specializes in employee compensation (in the US, those would generally be in the field of what is called “labor law”), ideally get the opinion of lawyers from 2-3 different firms.

Depending on the language the company included in whatever letter/contract/agreement you signed when you received your equity awards, the firm can do a number of things to screw you over as they please, as long as you had signed a contract agreeing to it: buy back your shares at $0.01, dilute them, simply cancel them, restrict them for an indefinite period, etc.

At this point, it’s not about what is unhappy/unreasonable. It’s about what’s legally enforceable. If they decide to be assholes, they can just cancel your equity and wait for you to sue them, at which point they might out-lawyer you. The steps you take from now on will improve or reduce your chances of winning a potential lawsuit, so lawyer up ASAP.