I’m in a complicated situation wherein my cofounders (2 of them) own majority stake in our business (let’s say 3/4 for arguments sake - cannot disclose true values). And I own 1/4. It was my idea and they were my former employers that encouraged me to execute on it with their resources. We setup the business and its been running as follows:
I put in 100% of my time and they put in about 5% of theirs respectively (settling disputes, helping with legal, doing some intros every now and then, helping to direct the company).
We want to bring in a technical cofouder for me, whom I’ve been working with (she’s been on a contract) for last 3 months. We are now restructuring the Shareholders agreement to allocate her options and give her a vesting stake in the business, and to also make room for growth.
It was agreed upon as follows:
I maintain my 1/4.
They dilute to 1/4 each.
We allocate 1/2 of the last 1/4 to our new employee on a vesting schedule; and the other half will be diluted from my existing cofounders shareholdings in an EMI scheme.
However, the change that has occured between that discussion and us drawing up the new agreement; is that they are now suggesting that they do not want employment contracts, but would rather be investors. Which essentially means that they have no legal obligation to contribute ANYTHING to the company going forward, (including financial contributions).
Is this fair?
If not, how can we do this in a way that is more equitable; and how would I go about getting them on board? What are my rights here?
Any advice would be greatly appreciated.