Can a US Company be sued for failing to honour equity component of offer of engagement? In the following scenario, does the individual have a legal case against the company? And if so, what law specifically can be applied? Summary A company offers x% equity. The individual engages. The company stalls, eventually offering "x% of profits during employ". The company has acted unethically and cheated the individual, but does the individual have legal recourse? Details A US company (Delaware) engages an individual (UK citizen) to manifest the core technology in exchange for a wage plus x% equity. The CEO projects the value of this equity to be eventually several million dollars. The company stalls on presenting a full legal contract, stating that the internal structure is in flux, presenting instead an interim contract which the individual signs, which makes no mention of equity. The individual commences work, bringing great value to the company. After six months the company finally produces a full legal contract. It offers x% of profits made by the company within the duration of employ. This is absolutely different from x% equity. The individual complains that this is clearly of considerably lesser value (orders of magnitude) from what was offered. First a product must be built. Only then can it be sold. The company has cheated the individual. The investor who initially said "Don't worry, we will not hold you to your stake" now says "We have decided only to reward those that are actively contributing". When challenged (on Slack) for reneging directly upon his word, he remains silent. The CEO says "We can only offer this "phantom" equity due to the way the company has been structured. This is the offer now, take it or leave it. We plan to revise the company structure later." Over the next 18 months, the individual continues to develop the core technology, while refusing to sign any contract that mentions this "phantom" equity. By the end of this period almost the entire technical wing of the company is composed of hires made by the individual. The individual has made a brilliant sequence of moves that would not otherwise have been made, sourcing / hiring developers in capacities in such a way as to guarantee the future of the company's product. Eventually the individual disengages. No revision has occurred. It seems clear that the company has no intention to honour the initial offer. And the product will now succeed. There is no incentive to continue. Evidence Initial email correspondence between individual and CEO making clear that the offer is for 2.5% equity Verified download of all company communication through Slack privy to the individual, demonstrating: repeated attempts by the individual for the company to honour their promise Evasive behaviour from the CEO The investor simply disconnecting from the discussion upon being challenged Contract revisions proffered by the company
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.
If the company makes a contract, and as a result of that contract it owes more money than it has, then the company goes bankrupt and the owners and directors can walk away from it. This covers the owners/directors in cases of ordinary business contracts. However if an employee (including an owner or director) does something sufficiently harmful then under the law of torts they can be personally liable as well as the company. Examples are negligence and fraud; if you build someone's new roof while acting as an employee and the roof leaks then its likely to be the company on the hook for damages. However if you misrepresented your qualifications or acted negligently then you might well be personally liable. This is all very general. Details are going to be specific to your jurisdiction. So the answer is that having a company is certainly better than making every contract in your own name, but its not complete cover. You can probably get insurance if this is a concern, but its likely to be expensive.
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 answer to the question "can so-and-so sue me?" is almost always "yes", regardless of context. Such a suit might be baseless, and it might get settled in your favor, but you still have to spend the time and money to defend yourself. This can be disastrous for a start-up that's trying to get off the ground, and it's how patent trolls make their money. (I'm not accusing SnapChat of engaging in such tactics as a rule, of course; I'm just pointing out that the legal system does allow for them.) Whether or not you are likely to be sued is a separate question, and one that can really only be effectively addressed by a trademark attorney with full knowledge of the particularities of your situation.
Such clauses are called "copyright assignment", "invention assignment", and/or "works for hire" clauses, partly depending on the clause's intent and wording. They're pretty common in employment contracts for software development and some creative positions. Frankly, the clauses don't actually do much, at least in the US -- copyright law already recognizes the concept of works made for hire (which belong to the employer), and claims too far beyond that are often rejected if they aren't obviously related to company business. With that said, your hypothetical programmer's painting is safe unless it depicts, say, the contents of an email from the CEO. :) Even if the clause technically entitles the employer to claim ownership, the employer has no legitimate interest in doing so. Likewise, that app created outside work is safe as long as it is created using no company resources and is unrelated to the employer's business. If the app is obviously related, that's where things get hairy.
You say the permission was "public", therefore I am going to assume that it cannot be argued that there was no agreement. There are two possibilities: If Company B has given consideration for the promise then there is a binding contract and Company A may be able to end it but could not seek redress for when it was in place. If there is no contract then the principle of promissory estoppel should have essentially the same effect. An agreement, including an IP licence, does not have to be in writing nor does it have to have any particular form.
england-and-wales No. This type of approach is a breach of the Solicitors Regulation Authority's (SRA) Code of Conduct for solicitors, Registered European Lawyers, and Registered Foreign Lawyers Paragraph 8.9 of the Code states that: You do not make unsolicited approaches to members of the public, with the exception of current or former clients, in order to advertise legal services provided by you, or your business or employer. This requirement is clarified by SRA Guidance that says: ...advertising to the public is permitted, subject to certain conditions... ... Specifically, you are allowed to advertise your services to the public so long as this is done in a non-intrusive and non-targeted way. This means, for example, that you may place an advert on the radio or TV, on billboards, in a local newspaper, online or on a social media platform. However, this advertising is limited... Paragraphs 8.9 and 7.1(c)1 of the Standards and Regulations prohibit unsolicited approaches to members of the public which, even if permitted by law, may feel unwelcome or intrusive. ... This means you cannot make direct or specifically targeted &quot;approaches&quot; to members of the public in person, by phone or via other means which target them individually. (My emphasis) This guidance goes on to give an example of prohibited advertising of the sort suggested by the OP: Firm A identifies from online media a list of people who have recently been involved in a major road traffic accident. The firm sends them a letter saying that it can help claim compensation. We [i.e. the SRA] would consider this a breach of our standards as it involves a targeted approach to specific members of the public which may feel intrusive to those who receive it due to the particular circumstances that they find themselves in. 1Paragraph 7.1 (c) of the Code of Conduct for Firms applies the same standard to firms.
A SAFE is basically what used to be called a &quot;subscription agreement&quot;, i.e. an agreement to invest money in the future that will ultimately give rise to an equity investment if made. From a practical perspective, while the contract is legally enforceable, pursuing a lawsuit to enforce it is almost always a death knell level bad move. Firms who sue investors early in the game don't get future investors. The amount of time it takes to enforce such an agreement in a lawsuit is also too long (perhaps a year or two before you have money in hand if it runs its course and still many months if it settles), and the cost of doing so is too great (probably more than $40,000 that you won't get back to bring in $400,000), for it to make sense to do so at the delicate early stage of a start up. Instead, what you need to do is get on the phone with the investor, or quite possibly meet in person, at their offices or in a more casual deal making environment over drinks, for example, to figure out what is troubling them or slowing things up and how to make them happy. This is more of a function of continuing to sell the fact that you are good investment and an opportunity that they are missing out on, than it is about telling them about your legal rights. If this fails, it is probably wiser to seek financing from someone else than to force them to perform.