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CardinalJay

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  1. Because of dilution by subsequent investors. Between 2015 and 2018 investors invested in the company obtaining 50% of the company so everyone's ownership was cut in half. I.E. if you owned 10% before you own 5% after. If you owned 20% before you own 10% after. But IF the grant date if after the 2018 court judgment then the employee is awarded 10% in 2018 thus coming in AFTER the diluting events. Alternatively, if its retroactive to contract date (2015) then the employee would participate in the diluting events (accounting nightmare to refigure including probably having to refile tax returns) and only own 5%.
  2. The valuation is irrelevant. There does not even need to be a valuation. The employee gets 10% of the company no matter. What matters is whether the grant date is 2015 (contract date) or 2018 (judgment date). If it is 2015 then the employee is diluted from 10% to 5%. If it is 2018 then the company owns 10%. The assumption is since the 10% has never been granted that he is granted 10% in 2018 (since the company is now forced to grant in 2018) and that it would not be retroactive to the contract date.
  3. The contract awards 10% equity but does not have a grant date. The order states that the contract is valid and company owes employee 10% equity but doesn't provide grant date. The employee's argument is there is not grant date so it is the date the 10% is actually granted which is going to be in 2018/2019 thus avoiding a lot of dilution. There doesn't appear to be any right to make it retroactive unless its just supposed to be the date of the contract.
  4. An employment contract awarded equity. The equity was not awarded resulting in litigation which resulted in a judgment for the equity that was supposed to be granted in the employment agreement. The date of the employment contract is 2015. The date of the judgment is 2018. If the equity is retroactive and granted as if it was granted in 2015 it significantly dilutes the equity and causes major accounting problems. If the equity is grant as of the judgment date (2018) then a employee avoids a lot of dilution that took place between 2015 and 2018. I"m asking whether the original date of the contract (2015) is the grant date for the equity or the date the judgment was entered (2018)? I work for the company that's going to be granting the equity.
  5. Would an equity grant be as of the contract date or the litigated judgment date if it was never awarded previously? In a employment contract dispute regarding equity, would the equity grant be as of the contract date (2015) or judgment date (2018)? The equity was never awarded and was litigated. If its retroactive to 2015, it causes MAJOR accounting and dilutions problems. If its as of the judgment date (or subsequent grant date) then the award is much more valuable than if awarded in 2015 because of avoiding significant dilution. Thanks!
  6. This is correct I actually know Manager A. Manager B has no major concerns other than possibly being on the hook for debt (but all payments are current) and maybe salary to Manager A ($120,000 per year but this is reasonable in the situation). Although, Manager A is concerned about a potential fiduciary duty claim because she didn't notify Manager B even though Manager B's vote was of no consequence.
  7. In addition, the Operating Agreement states, "the Members may act by a written consent executed by the Members holding the percentage of Interests required for the action to be taken under this agreement." In this instance, one member owns Supermajority so she has the "required percentage of interests" to take action.
  8. I apologize for not explaining well. I'll try again. Co-manager A owns 95%. Co-Manager B owns 5%. Operating Agreement states in the event the Co-Managers cannot decide an issue (tie vote) that the tie breaker is majority ownership. So, Co-Manager A has been operating the business by signing Written Consents with her signature on it without informing Co-Manager B because based on the Operating Agreement Co-Manager A has the Tie Breaker vote because she owns the majority of the member interests. All decisions were in the ordinary course of business but Co-Manager B was not notified generally of the decisions by Written Consent. All written consents have Co-Manager A's signature on them as both a Co-Manager and a Member.
  9. The tie breaker is a vote by the members. One of the managers has a Supermajority interest as a member.
  10. In an LLC, can the majority proceed on a legitimate business issue by written consent (written consents are allowed according to operating agreement) and not inform the minority of the vote because their votes don't matter? If so, is this also proper in a 2 manager LLC if one manager has tie breaker rights? Basically, can the single manager draft a written consent and sign it because he has tie breaking authority?
  11. The case in question was a breach of fiduciary duty case. The Plaintiff hired 2 expert witnesses both to prove breach and to prove damages. Defendant attorney stated he does not see the need for an expert in response to client asking "do we need expert witnesses"? In addition, Defendant attorney told client no need to review expert's report as "he may not be allowed to testify." Defendant ended up with large judgment against him. Was Defendant attorney's actions malpractice and below the standard of care?
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