19/08/2013
The importance of getting shareholders agreements and other documents in place when setting up a company and/or start up.
mCommerce Limited was founded by Gregg Nelson together with David Stimpson and Ross Chesney of Stimpson and Co in Wellington in August 2011.
Gregg Nelson owned 60% of the shares in the company that were held in escrow for him by Stimpson and Co supported by a shareholders agreement. The remaining 40% were held by Stimpson and Co with 30% and Chris Wenzlick 10%.
In January 2012 Gregg Nelson re-united with his father Mike Nelson after being estranged for 7 years after a dispute involving the company LemonCheck Limited which was also founded by Gregg Nelson and which Mike had funded via capital for equity.
Mike asked Gregg about his new business, and in the next few months persisted in suggesting to Gregg that he become a silent partner/investor with no control or active day to day running of the company offering to put in the capital for equity.
Gregg continued to resist the offer from Mike Nelson and instead told him that his motivation for the reunion was to have his father back in his life and not a business partner which culminated in Mike Nelson sending Gregg an email saying that if Gregg didn't want Mike as a shareholder then the reunion was without merit and he would no longer want to be part of Gregg's life.
Gregg had just lost his best friend and de-facto dad Frank Mazzola who passed away on January 29 2012 from a sudden heart attack. He was vulnerable and Mike knew it.
Gregg went to his shareholders and partners not wanting to lose the new found relationship with Mike and pitched the offer to them. They asked if it was Mike Nelson behind the offer and when they found it was they declined to accept it.
They agreed to sell their shares back to Gregg Nelson on a dollar for dollar basis and Gregg set about negotiating the terms of Mike's shareholding which involved Mike agreeing to contribute upwards to $500,000 as and when the company required it with Gregg reducing his shareholding to 51% and allocating Mike Nelson a stake of 39% and Chris Wenzlick 10% with Chris's contribution coming by way of sweat equity (Chris was the software developer).
Mike agreed to hold Gregg's shareholding in escrow for him supported by a shareholders agreement outlining the terms including that Gregg would be the CEO, Mike the CFO and Chris the CIO and in August 2011 Stimpson and Co were bought out.
Gregg did not disclose his shareholding in the companies office register due to the fact that he had outstanding IRD issues that he was working through and the consensus was that when the company started making money Gregg would be able to negotiate with the IRD to repay his debt and he would then be able to disclose his shareholding in the company.
All of these negotiations, including shareholders agreements - emails and other supporting documents are held on the mCommerce server and email client under the .co.nz domain.
mCommerce set about opening offices in Auckland, hiring staff and developing it's maiden product mycarM8 which was launched in October 2012 and in November 2012 gaining the status as Idealog magazine's APP of the month.
In December 2012 a dispute arose between Gregg and Mike about excessive phone bills and parking tickets that Gregg was alleged to have incurred that culminated in Mike saying he was pulling the pin on the business which as CFO he had no mandate to do and set about sacking Gregg as CEO firing the staff, canceling the companies tenancy, power, Internet access and phone accounts.
He then laid a complaint with Police that Gregg had stolen the company car, computer software and hardware, had threatened to kill Mike and had disappeared.
Gregg Nelson alleges that he blatantly has mislead the Police by way of making a false statement saying in part "The complainant is the major shareholder of a company that he co-owns with another business partner. In late 2012 he gave the defendant a job at his Auckland company and also a $15,000 company car to use" knowing of the shareholders agreement - emails and other evidence he holds and has failed to disclose or allude to Police.
Currently Gregg faces criminal charges of Theft by a person in a special relationship x2 and Threatening to kill him during an alleged phone call that never happened.
Mike has also locked Gregg out of the accessing the mCommerce server so that he can't access the evidence he needs to adequately defend against the allegations that prove beyond any doubt that Mike Nelson does not own the company as he has suggested to police under oath in a sworn statement.
Mike Nelson is actively trying to dispose of the company assets including all of Gregg's intellectual property, business plans and other company owned assets to recover his capital for equity.
Gregg made a mistake that he thought was a calculated one being that the shareholder-investor in his company was his father. This case shows that no matter who your potential shareholder or investor is it's essential that you get the paperwork done, signed and sealed BEFORE the money and shares change hands.
Gregg now finds himself on bail awaiting hearing to defend the charges, a job that will be all the more difficult because of the lack of documentation to support his defence whilst Mike holidays in Spain holding all of the aces and the assets.
In Gregg's own words he says "Everyone in the world except Mike Nelson knows who owns that company and who's idea it was - tonight I can sleep well so that I can fight tomorrow to keep hold of my dreams".
Currently Gregg is writing his autobiography that will detail his life in an inspirational story of overcoming the odds and never giving up on your dreams which he has titled:
"Stolen and Recovered"
The compelling true story of a stolen innocence, a stolen youth and a stolen idea or two - most of which have been recovered.
Should be a good read.
