- Jurisdiction
- Minnesota
Hi, I need some legal advice regarding a situation I have with an investor.
Situation:
An investor could not pay the full investment amount for the amount of equity in my private company so we set up a payment plan for them. The agreement was that they put down an initial amount and would pay in monthly installments paid on a schedule until the full amount was fulfilled.
The Investor was able to put down 25% but when the time came for the installment payment to be collected, the investor requested a later payment due date due to some personal issues which I agreed to. The new due date came, and still no payment. This is a breach of contract because now it is past the due date for the payment and they are unable to pay.
After speaking with them, I found that they have a family emergency which is requiring them to fund a family's medical situation and that is why they are unable to pay. In the time span of 1 week of going back and forth prior to the due date, the investor has made the following statements and requests:
In the sequence of requests and events:
1. Push back the payment until 3 months later and they would pay the full remaining balance. The 75% leftover.
- To this I let them know that there is a late fee that would be applied for each missed payment because this was on the payment plan agreement they signed.
- The investor denied paying the late fees.
2. Pull out of the investment and get returned the money they initially put in.
- The contract they signed states that they cannot request to pull out of the company until 1 year after. It has only been a little over 1 month.
3. Push back the payment until 3 months later and they will be able to pay the 3 months of installments without late fees.
- Missed payments would incur late fees according to the contract they signed.
4. Finally, they said that they would be willing to surrender any shares and forfeit any amount they put into the company and just get out.
- I let them know that on my terms because they are affecting my business and delaying it due to non-payment, there would be a fee. The investor was unwilling to comply with the multiple options I offered. The options I offered were to pay a lower fee to pull out now, pay a higher fee to pull out later or stay in the company as an investor but either pay the installments or they will have to pay the late fees if they want to pay later.
5. For the last time, I spoke with them and they told me their situation. The Investor was unable to secure funds in order to pay the installments and will not be able to secure funds in order to pay later either. At this point, I offered them what they wanted which was to surrender all shares and cut ties with the company and leave their initial payment.
Now my questions are, in the original investor agreement, there is no forfeiture clause. Would this still fall under the forfeiture laws/regulations where the investor agrees to forfeit their shares and funds and the company has no obligation to pay anything back? Would I still be able to give a 14-day notice to pay or otherwise they will be automatically terminated and forfeited? Since the investor could not pay on time and the due date is now past, it is a breach of contract so what is the best solution to this situation?
Situation:
An investor could not pay the full investment amount for the amount of equity in my private company so we set up a payment plan for them. The agreement was that they put down an initial amount and would pay in monthly installments paid on a schedule until the full amount was fulfilled.
The Investor was able to put down 25% but when the time came for the installment payment to be collected, the investor requested a later payment due date due to some personal issues which I agreed to. The new due date came, and still no payment. This is a breach of contract because now it is past the due date for the payment and they are unable to pay.
After speaking with them, I found that they have a family emergency which is requiring them to fund a family's medical situation and that is why they are unable to pay. In the time span of 1 week of going back and forth prior to the due date, the investor has made the following statements and requests:
In the sequence of requests and events:
1. Push back the payment until 3 months later and they would pay the full remaining balance. The 75% leftover.
- To this I let them know that there is a late fee that would be applied for each missed payment because this was on the payment plan agreement they signed.
- The investor denied paying the late fees.
2. Pull out of the investment and get returned the money they initially put in.
- The contract they signed states that they cannot request to pull out of the company until 1 year after. It has only been a little over 1 month.
3. Push back the payment until 3 months later and they will be able to pay the 3 months of installments without late fees.
- Missed payments would incur late fees according to the contract they signed.
4. Finally, they said that they would be willing to surrender any shares and forfeit any amount they put into the company and just get out.
- I let them know that on my terms because they are affecting my business and delaying it due to non-payment, there would be a fee. The investor was unwilling to comply with the multiple options I offered. The options I offered were to pay a lower fee to pull out now, pay a higher fee to pull out later or stay in the company as an investor but either pay the installments or they will have to pay the late fees if they want to pay later.
5. For the last time, I spoke with them and they told me their situation. The Investor was unable to secure funds in order to pay the installments and will not be able to secure funds in order to pay later either. At this point, I offered them what they wanted which was to surrender all shares and cut ties with the company and leave their initial payment.
Now my questions are, in the original investor agreement, there is no forfeiture clause. Would this still fall under the forfeiture laws/regulations where the investor agrees to forfeit their shares and funds and the company has no obligation to pay anything back? Would I still be able to give a 14-day notice to pay or otherwise they will be automatically terminated and forfeited? Since the investor could not pay on time and the due date is now past, it is a breach of contract so what is the best solution to this situation?