Founder/Company Disputes, Employment Agreements, including Severance, Change of Control, Competition, Stock Options, Corporate Governance
The Founder/CEO of a start-up software company is told by the Chairman of the Board that he must resign as the CEO within the week or he will be terminated for cause. If the Founder/CEO is terminated for cause, he will lose the severance payment promised in his employment agreement. He signed the current employment agreement just two months earlier in conjunction with a recent investor’s election to the Board. The claimed cause for termination is financial mismanagement, including the harassment of the accounting staff. The CEO believes the conduct does not rise to the level of “cause” for termination and that the investor has conspired with the other Directors to wrest remaining control from him before the Initial Public Offering, which is scheduled to close in thirty days. This scenario raises many legal, business, and employment issues, all of which must to be solved confidentially and within the time frame dictated by the Company’s public filings. For these reasons, many business disputes which arise in a young company are inter-related with employment issues, and many are resolved in mediation before litigation is filed.