I was involved in a startup company, we were marketing a commodity product, but to a new market segment. We had something special. I got my friends and family to invest, gave them info, had them meet with CEO and they largely plopped their money down because of trust in me. However, after a year with this company working for stock only, I realized that this president is not a well rounded business leader. In fact, he is making bad decsions that has cost the company a lot of money. I could not afford to work there anymore and left. I still stay in contact since I have more money invested than my freinds. I feel awful not for me but for my F&F who got involved in this. The CEO claims to have our money in an escrow account. Is the money gone? How do I find out if he has it or not? The company has about a million in inventory, what can the stockholders do to get their money back?
2007-12-06 09:10:14 · 4 answers · asked by Career Advice 3 in Business & Finance ➔ Investing
You should have told them when you left the company and just like you bragged about the potential, you should have warned them once you realized how many bad decisions he makes. Better late than never, as the old saying goes. Tell them quickly.
It is unusual to put investments in an escrow account. If I wanted investments in my company, I sure would rather be spending it than putting it in an escrow account. Likewise, if I am the investor hoping for big returns, I would not expect much if the company said they will just put it in an escrow account.
If the money is in an escrow account, it is not gone, but it might not be accessible either. He may be trying to say he expected the investors to want their money back so he set up a special account for it, it is collateral (pledged against a loan), or he is lying and he is trying to make you think the money is inaccessible and have all of you wait forever until one day when he makes money and you hope he uses it to pay back his investors.
Go along with the CEO and ask him how the investors could get their investments and earnings. Is there a form, is there a hold, if so, when will the funds be released, and how long will it take to process the investor refunds?
To find it, you can ask the company's financial department for the balance sheet. If it is incorporated, it should provide financials to all the investors on at least an annual basis. So push for some financials immediately if it has been over a year or at least get a date as to when you can expect to get the year end financials. The financials should list the escrow account with a minimum balance of the sum of all your investments, and if not, then ask the CEO to explain where on the balance sheet the escrow account is represented or have the CFO explain it to you. As stockholders, all of you are owners and have the right to know. You could ask at an annual stockholder's meeting but if he is not holding the meetings, then any time is a good time.
If he ever says the company has the money invested in the company such as inventory, then you and your fellow stockholders can only wait on dividends or until you find a buyer for your investments. The company is not required to buy them back. However, if it is a partnership and everybody is a partner, they could dissolve the partnership and liquidate it to pay everybody what they can and the CEO would have to startup a new company and have it take out a loan to keep the assets and pay off all the partners wishing to take their money and run.
Let's say for instance that everything is leased except for office furniture, computers, and supplies that would just pay off the building lease if the company were to shut down today, the company has no debt, but has $100K in cash and $900K in inventory. Let's say your F&F invested a total of $250K, you invested $150K, the CEO invested $300K, and the CEO got some of his F&F to invest another $300K. There would be no accumulated earnings because the assets equal the investments just as when the company was started. To liquidate, he would have to sell the inventory. If it was sold for less than what it is priced at, each person would take a loss, and if it was priced at cost and sold for more, than each person would come away with a share of the earnings. Even in a partnership, when one partner leaves, the whole partnership is dissolved, but not necessarily liquidated, and has to start a new company. If you and all your friends wanted your money, he would have to have the company take out a $400K loan against the inventory to pay off you guys, but if it is a corporation, he does not have to do anything and you guys have to sell your shares to the CEO and his F&F or other investors for whatever they are willing to pay.
2007-12-06 10:03:15 · answer #1 · answered by Frank 5 · 0⤊ 0⤋
Sorry to hear that. The first two people who answered make a lot of good points. I would just like to add that I think it would be a good idea to get a lawyer. I'm not exactly sure what kind of investments you and your family made in this business and how it's all set up, but it sort of sounds like the CEO is being dishonest and his either hiding money from you or telling you he has your money when he really doesn't. So I'm not sure if a good lawyer could do anything for you or not, but if you feel like you're being deceived, I'd call one up, even if it's to ask some questions.
good luck!
2007-12-06 11:05:00 · answer #2 · answered by qu1ck80 5 · 1⤊ 0⤋
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2016-10-10 10:15:20 · answer #3 · answered by ? 4 · 0⤊ 0⤋
apologize to your friends. tell them the truth. ask them to forgive you. tell them you were wrong and made a bad decision. they need to get together and demand their money back if possible. they will probably get nothing. the CEO is probably lying to keep everyone off his back. it's probably a total loss. live and learn. apologize. beg. admit. that's the only way.
2007-12-06 09:13:45 · answer #4 · answered by Sufi 7 · 0⤊ 0⤋