Start-up companies

When someone who has an ownership interest in a private (not publically traded company) goes through a dissolution of marriage, there are often challenges associated with dividing that interest.  There are many entrepreneurs in Boulder County who are involved with start-up companies where the spouse receives equity interests as part of the compensation package or as part of direct investment, equity interests.  These equity interests can have many names and the legal rights attached to each one is governed by the grant documents.  Because they are not publically traded the interest can be difficult and expensive to value.  Even an “in-kind” division which avoids valuing the interests can be complicated.  Spouses in a dissolution of marriage have a fiduciary duty to provide reasonable financial disclosure to one another.  However, most of these private companies require the spouse who has the equity interest to sign a non-disclosure agreement (NDA) prohibiting the disclosure of information to third parties (including spouses).  The District Court, however, has subpoena power to compel production of documents from the company.  It is generally in the company’s best interests to cooperate and provide these documents to the non-owner spouse so as to keep the information “in house” and between only the divorcing spouses.  But many corporate counsels for these companies have little understanding of the extent of the Court’s subpoena power of the “fiduciary duties” imposed by the Colorado dissolution of marriage statute.  The inherent conflict between theses competing interests and responsibilities creates significant legal challenges but also opportunities to work cooperatively for everyone’s benefit.