Under normal circumstances, this would be a no-brainer. But there are some details that can make it trickier. My ex-co-founder has mental health issues I wasn't aware of when we started working together (we met at a founders meetup in SF and he seemed pretty normal by then). I politely decided to stop working with him after finding out and hearing horror stories from mutual connections and his previous employers (lawsuits, threats, etc). After I broke up with him, he became a completely different person: he tried to contact the university I graduated from to get my title revoked, tried to get me fired from my job and tried to forcefully make me sign a contract waiving all my shares, ip and rights to the stuff we both worked on (I didn't sign it). I'm not mentioning this to complain but to paint a picture of a deeply troubled person who will do anything to cause as much damage as possible if things do not go their way.
I want to pay our contractors what we owe them, but I am slightly concerned I'll get sued or in any other kind of trouble if I use the remaining funds to do so. My main question is: should I pay them? What is the worst he can do if he disagrees? Can he sue me? Report theft? We don't have any cofounder agreements signed, the only thing we have is the company and the bank account (we were working on the paperwork but never got to sign it). And we don't have signed agreements with our contractors. But, we have a working demo and all the code they delivered.
Thank you!
But as said in another response, hire a (not-too-fancy) lawyer or a company liqudator to constrain how messy this may get.
If you're worried about litigation and liability, fall back on what the concrete legal docs say you can do.
If not done yet, step one should probably be updating the company docs to reflect the reality of the founder separation. This of course requires negotiation of an agreement with your cofounder unless you set things up where you have controlling interest already or want to outsource it to a lawyer.
If you clarify the region, company type, and whether the separation was formalized, then folks might be able to provide more specific advice.
Not paying the offshore devs could also theoretically lead to a lawsuit. A lawsuit for not being paid is an easier lawsuit to win than suing a business partner for paying valid expenses the company had accrued.
But you should definitely talk to a lawyer.
Get a lawyer.
Honor your commitments.
the contractors aren't the only stakeholders at risk in this choice. how do your investors feel about this situation? what's their moral compass?
You bought services from people.
You have the money to pay them.
It’s a genuine question… who is it that looks at this situation and is unclear about whether to pay the people whose services you have already consumed?
If their invoices are due go pay them NOW.
Imagine you built some software for someone and when it comes time to pay they say “hey I’d really love to but I’m in a legal situation with my cofounder”.
That’s completely unacceptable. Pay your people.
And honestly if you don’t know the right answer to this question then you shouldn’t be in business.
They have spent all of human history creating a cartel for solving problems. Never let the cartel know you tried to solve a problem without paying their toll, otherwise things will be made worse.
Do you have signing authority? And for how much?
Who signed for the accounts etc?
Ignore the people here. The overseas contractors aren't going to sue you. Your ex partner won't either.
Nothing you do will somehow make him behave well. Pissing off a whole lot of other people by screwing them financially out of fear of his reprisal means now you have more enemies and a black mark against your character on top of a nutcase hounding you who will do insane, abusive garbage for irrational reasons.
Any protection you have from him lies in not screwing others in the name of covering your ass here.
He's going to keep trying to hurt you no matter what you do. Others will protect you or not to some degree largely based on your behavior.
Let's talk how that actually works in a business sense. Did you leave the company? Relinquish all control? Did you boot the cofounder out or did you buy out their portion?
What type of arrangement is this? Partnership? LLC? How did you register the entity?
"Broke up" doesn't really say anything.
Assuming you were in a partnership and you both have authority to make decisions on behalf of the company then you are free to just pay the contractors. So is your cofounder. Unless your governance documents indicate otherwise this is 100% valid.