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Chapter 43. Obligations Before Negotiations

The end of your company’s life is no less paradoxical and confusing than the beginning. Just like when you started, your entire job consists of doing something you’ve never done before. What’s worse, over the years, your conflicts of interest have grown along with the legal constraints. And while at the beginning you could fail quietly in your basement, you now have investors looking over your shoulder with real money on the line.

As when you started, you will feel an obligation to your cofounders to do right by them. Unlike when you founded the company, that imperative no longer has much legal basis. Your cofounders are probably not the sole (or even majority) shareholders. While they are special to you, in the eyes of the law, you have taken on more and bigger obligations.

Your First Obligation: Your Debtholders

First and foremost is your obligation to your debtholders. While that may seem like a strange way to start the analysis of company obligations, it can sometimes be the beginning of the end of your concerns.

The obvious case of this is traditional loans. Perhaps the most important case of this is unpaid wages, for which members of the board of directors can be held personally liable. But there’s a less obvious circumstance to consider as well.

In March 2007, we were having an Ontela board meeting like any other. I was going through the financials when one of our board members, Enrique Godreau, asked a question that threw me ...