How is a shareholder allowed to sue the company? There are news about shareholders suing VW due to the losses that happened by the emissions fraud (lots of examples in the news, this is just one of them). Now, I understand customers suing VW, and I would understand shareholders suing the CEO, the CTO, the entire board or any combination of them, and other managers implicated in the issue. That part is clear. But, since the company is owned by the shareholders, suing the company does not make a lot of sense to me, because: Conceptually it is a lot like someone suing himself (yes I know the companies are different legal persons, but still); one could argue that the shareholders did benefit from the fraud while it was ongoing yet no customer can sue them. Any damages they take away from the company will decrease the value of the company, thus decreasing the value of their stock. Add to that the legal costs from both parts and the most probable result will be a considerable net loss. Add to that the additional negative info for VW due to the lawsuit and it sounds a lot like using a gun to kill that fly that is on your hand... The only possible explanaitions that I may think of do not sound very smart: They hope that only a handful of stockholders will sue, so the damages paid to 10% of the stockholders will be diluted between the 100% of the stockholders... but once there is a sentence against VW, I would think almost all of the small stockholders would join any action class lawsuit. They hope to get to a situation were they get the money and VW gets in enough of a bad shape that forces the German government to bail-out. I don't know, the situation seems strange to me. Are there legal precedents of shareholder suing the company (not its management) before? Update: To (hopefully) explain my doubts... If I buy a VW car and find it is not what I was promised, I can sue VW (the company) because I have a contractual relationship with it and the contract has not been honored. But a shareholder will have an ownership relationship with the corporation, which is what makes me doubt the possibilities of such a lawsuit1. And of course, there is always the -very, very, very tiny, almost non-existent - possibility that journalists are not reporting the issue correctly. 1Of course the individual members of the board and employees that failed in their fiduciary duty may be sued, but they are not the corporation.
There is certainly precedent. This list of the 10 biggest class action lawsuits in the world indicates that 8 of the 10 were by investors against their own company. In any event your analysis is flawed. The people who initiate the class action may (probably are) no longer be investors because they sold their shares and realised their losses. Further a legacy investor who didn't buy on the basis of the company's wrongdoing would not be entitled to damages. Finally, an investor who bought at say $100 on the basis of false information (like the cars were legal when the company knew they weren't) and now hold shares worth $40 will wait many years (if ever) to make good their losses: a lawsuit will be quicker and more certain.
The question of whether a person was acting on their own behalf or that of a company would generally be a question of fact, so if such a case came to court it would be for both sides to present evidence and argue for their interpretation of it. In most cases the context makes it clear. You mention having a company email domain and associated email signature; that is certainly good practice and would go a long way towards creating a presumption that you were acting for a company. Also signing yourself with your job title or role (e.g. "Joe Bloggs, Chief Bottlewasher") makes it clear that you are speaking in your role as an employee. The content of the communication also matters; if you use your company email address to order goods from a supplier that the company has used before then the recipient can reasonably assume that you are ordering on behalf of the company and a court is likely to agree. OTOH if you use the company address to send libellous emails then the recipient would have a much higher bar to claim that this was the company view rather than a personal one.
In the US, "insider trading" includes both legal and illegal versions. When a corporate employee buys or sells shares of their company, they are insiders and they are trading (there is a requirement to report to the government). The illegal version involves breach of fiduciary duty or confidence. The relevant section of the federal regulations is 17 CFR 240.10b on "Manipulative and Deceptive Devices and Contrivances", and you will note that the section does not rely on the term "insider" in the law part, instead it directly characterizes what acts are illegal. Thus it would not matter, from a legal perspective, if someone considers you an insider. It is illegal to trade in securities using a “manipulative, deceptive, or other fraudulent device or contrivance”. This relates to what is commonly known as insider trading via rule 240.10b5-1, by defining as manipulative and deceptive trading on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information (emphasis added to focus on the core requirements). Whether or not you have a "duty of trust or confidence" is determined by common law standards, that is, it depends on how courts have ruled on similar matters. For instance if the CEO of Apple tells you "Our computers explode and it's gonna be on the news tonight, the stock is gonna tank, but it would be illegal for you to act on that information", then it would be illegal, because you are aware that the CEO has a duty to not use that information (thus you "inherit" the duty). This also holds if he doesn't tell you that acting on the information, since it is expected that you know that the CEO of Apple could not legally act on that information (even if in fact you are unaware of the law -- ignorance of the law doesn't get you anywhere good). However, if you are unaware and could not know that the person making the factual disclosure is divulging information that he has a duty to shut up about, then you might not get prosecuted.
In the worst case if they shut shop, then how might I go about getting my money back? It is unlikely that you can. A SAFE is not a loan (and for that matter isn't even a share in the company) and doesn't create an enforceable contractual right to get your money back. If you make an equity investment and the company loses money and goes out of business, you lose everything you invested. If the promoter made false representations that induced you to invest, or actively concealed material facts about the investment, you might be able to sue the promoter for securities fraud under federal regulation 10b-5, or under a state securities law, or under a common law fraud theory. You could also sue to issuer of the investment (i.e. the company) but that would usually be futile because the company is broke and hence judgment proof. State or federal securities regulators or a local district attorney or state attorney-general might pursue the case in lieu of a private civil action by you, but getting them to take action is often quite difficult. But, if your investment wasn't induced by fraud and instead the management of the company simply made bad decisions that caused the company to fail, you have no remedy. The investment was for a SAFE (Simple Agreement for Future Equity). I have the signed SAFE with me. This is a very unusual way for a QoZ to be structured, which adds to the sense that this may have been a shady venture.
The shareholders can change who is the company director, but the company director runs the company (until he or she resigns or is forced to sign by the shareholders). So the company director is who has the say what happens in the company. If the contract is between Fred and John Smith directly, then I would expect John Smith to give the orders and to pay Fred. However, Tom is company director, so he can order Fred to stay off the company premises. He can't order Fred what to do, since there is no contract between Fred and the company, and the company won't pay Fred if it doesn't want to - it's up to John Smith to pay Fred from his own pocket. The whole setup is highly unusual. I would assume that the situation is unsatisfactory for everyone involved, so likely they will agree that the contract between John Smith and Fred is cancelled, that there is a new contract between Small Company Ltd and Fred, and from then on the company director gives the orders.
Under U.S. law, this is only actionable is you make this statement knowing that it would not "support the continued creation of X" and that instead, you had already completely abandoned that product and you were, for example, planning to change lines of work and become a lumberjack instead. Even in that case, common law fraud is hard to show, because you would need to show how that statement which related to how the profits will be used, rather than what you are actually receiving, could cause you damages in that narrow transaction. But, many states have deceptive trade practices acts that protect consumers by allowing the attorney general, local prosecutor, or a private individual or class of plaintiffs to sue if representations such as these are made when they are known to be false. Typically, these lawsuits provide for minimum statutory damages, attorneys' fees award, and when cases are brought by a public official, injunctive relief (ordering the advertising with that pitch to cease) are authorized. For example, saying this when it is false would be actionable in California and Colorado. A fairly common fact pattern is that someone will sell stuff at an above market price saying that "profits will help me pay for my cancer treatments" when in fact the person doesn't have cancer. This could even constitute criminal wire and mail fraud, for example. Sometimes, competitors can also sue you under the Lanham Act (which primarily governs federal trademarks), for false advertising about something that could unfairly undermine their sales if what you are saying isn't true and is causing their sales to drop. On the other hand, if you sincerely believe that what you are saying is true when you say it, and your belief is not so unreasonable that no reasonable person could believe that under the circumstances, then what you are saying is legal. Usually this is true, and if it is, ultimately, you will be fine. Although nothing can prevent you from being sued on a non-meritorious basis. In between are cases where this is true (you will be supported, but perhaps only get 5% of the profits while the rest are garnished for a lawsuit), but your statements were still misleading at the time you made them and you knew it. Those cases get resolved on a case by case basis. Outside U.S. law, your mileage may vary. Legal regulation of commercial speech varies significantly from one country to another. These statements might not be O.K. for example in a Communist regime on the Chinese or Korean model.
Yes a company can be sued (since anyone can sue anyone). But in order to win a lawsuit, you have to have damages as a result of some action, AND you must prove that the action was done with intent to harm or was otherwise negligent. So following your website example, a lot of things would have to happen: The website would have to be hacked. If the passwords are encrypted instead of hashed (which still qualifies as "plain-text" once they email it to you), the hacker would have to figure out how to decrypt the passwords. (Which a good hacker could probably do.) The hacker would have to take those passwords and do something with them that causes damage to their owners. Even if all of those things happened, you would still also have to prove negligence on their part which would be pretty difficult to do because the flaw that was hacked would be the focus of negligence discussions moreso than what was stolen. That being said, if your goal is simply to get them to fix the problem, rather than receive monetary damages, then you could still sue for an action to be taken. You'd have to pay by the hour for the attorney since they wouldn't have a chance of winning monetary damages. But in all likelihood the website owner, upon seeing the lawsuit, would fix the problem before it gets to court, so I could see that having the desired effect. That is if you think it's worth the cost of filing the lawsuit in the first place. Perhaps you could save yourself the cost of an attorney and just threaten to sue if they don't fix the problem.
does the individual have a legal case against the company? Unfortunately, no. Some details and terms you use are unclear (e.g., "phantom" equity, "manifest" core technology, and so forth), but your overall description reflects that the individual sabotaged himself by signing a contract that does not mention the promise of equity through which he was persuaded to engage. A written contract usually supersedes any prior agreement --regarding the subject matter of that contract-- between the parties. That superseding effect means that the contract formalizes or overrides, accordingly, said agreements or promises. Since the initial promises of equity are not reflected in the "interim" contract, the investor's subsequent silence upon individual's reproach/reminders is from a legal standpoint irrelevant. At that point only the terms of the contract matter. The individual might consider alleging mistake in the sense of Restatement (Second) of Contracts at § 151-154 such that would make the contract voidable and perhaps "make room" for other theories of law. However, that seems futile unless the interim contract contains language that (1) provides specific conditions for its expiration, or (2) reflects the company's [mis-]representations that induced the individual to sign it. Neither seems to have occurred in the situation you describe. There is always a possibility that the contract might favor the individual's position and he just has not noticed it. But the only way to ascertain that is by reading the contract itself.