I invested $25,000 into a company over the past year for 5 ownership. I was suppose to be able to buy 1 for $5,000 and up to 20. We did a...

Question

I invested $25,000 into a company over the past year for 5% ownership. I was suppose to be able to buy 1% for $5,000 and up to 20%. We did a handshake deal but always spoke about it in front of my office manager. The company has grown a lot and now he is saying that he doesn't need my money anymore so he capped me at my 5%. Do I have a legal leg to stand on trying to get the additional 15% I am owed by continuing paying in?

Answer

With a few exceptions, verbal agreements are just as valid as written agreements. However, the trick is proving what the terms of the agreement was. You'll have the same problem here. Unless you can get him to admit that they agreed to allow you up to 20%, you'll have to prove those were the terms. If you want to pursue it, first have a local attorney draft a demand letter and see how he reacts. Make sure to get whatever evidence of the deal you can find.

Answer

While a verbal agreement can often be enforced, the key is can you prove it? You never should have invested a cent without a written parnership agreement. Sit down with a lawyer to determine if there is a paper/evidence trail that could prove your case.