It’s always darkest before the dawn. But, sometimes it’s also darkest before a thunderstorm.
So, you and your co-founder have been having rows of arguments. He’s too shady for your liking and you wish you listened to your boyfriend/girlfriend when he/she warned you against him. You’re desperate to bring an end to the relationship. But unlike a dating relationship, you cannot simply send a text saying ‘Me? You? It’s all over.’
Most business relationships are governed by laws and rules which must be followed for certain actions to be valid. For instance, the fact that you hail your co-worker or even co-founder, ‘Chairman!!’ does not automatically make him the Chairman of the Board of Directors in your company.
It is therefore important to follow due process always. And it makes sense that the law would want to interfere in your business because your business is not necessarily yours alone – somehow, the public is affected by it as well.
Now, on removing your co-founder, it might be important to first state that the term ‘co-founder’ is not really a legal term. It’s just a nice and popular business word that looks good on Twitter bios and Business cards.
The first thing you must do then, in determining how to end the relationship between you and your co-founder is to determine what this relationship is – that is, his or her legal status in the context of your business.
Here are some suggested statuses:
– A mere partner: Partner, here, simply means someone with whom you carry on business. In this scenario, your business entity is most likely, not incorporated. For this kind of relationship, dissolving the partnership or removing a partner is largely determined by the prior partnership agreement you had. And if you did not have any prior agreement, you might have to fall back on simply informing him that you don’t want a relationship again and then dealing with whatever reaction comes out of your declaration.
– A Shareholder: Strictly speaking, the shareholders own the company. So if the shares of a company are divided amongst three people, the three of them own the company to the tune of shares they have. It is possible that your ‘co-founder’ may not be a shareholder. If however, your co-founder is also a shareholder in the company, it might be very difficult to ‘remove’ him from the company. This is because the shares are his property and unless he sells, transfers or transmits them, they belong to him. If, however, he is not a substantial shareholder or does not hold a lot of shares, you may be able to control the affairs of the company by your overriding votes.
– A Director: The directors are managers appointed to oversee the affairs of the company. If your co-founder’s name was stated in the Articles of Association as a director, she is a director. If she was actually appointed by the shareholders at an Annual General Meeting (AGM), then she is also a director. To remove your co-founder from being a director, you’d have to go through laid down rules. At the AGM (of which special notice is given), you may pass an ordinary resolution to remove her. (N.B. the underlined terms have technical meanings, so you may want to contact a lawyer to help you with those). Also, ensure that your co-founder is given notice of the intention to remove him at the meeting (this is SUPER IMPORTANT). Also, note that the fact that you were able to successfully get your co-founder removed at the AGM does not deprive her of her outstanding compensations or even court-ordered monetary reliefs.
Those are legal hacks.
Now here’s a life hack: Endeavor to end relationships amicably.