Stories from the Trenches
The following are taken from actual stories from investors that have served as the shareholders’ representative.
They proceeded to sue me personally...
"Five days after escrow period EXPIRED, I received notice from the acquiring company that they wanted to make claims against the escrow. Of course, I said ‘no.’ They proceeded to sue me personally, the shareholder rep, and I was served at work in the middle of a meeting. They had a team of lawyers and accountants on their side, and I got to work for free, adding enough hours to my schedule to amount to a second full-time job trying to represent our interests. I will never be a shareholder rep again."
...spending countless hours communicating with the shareholders...
"Invariably, whenever I serve as the stockholder rep, I end up spending countless hours communicating with the shareholders, producing and checking spreadsheets, and working through individual matters, even in the absence of claims. My favorite was, ‘My name is [insert name]. When I worked at the company, my name was [insert completely different name]. I moved back to China, but then later returned and am working here again, although my name on my passport is now [insert yet again different name]. I am now at a different company and live at a different address. In order for the escrow agent bank to pay me they need proof that I worked at the company and held shares. Can you help?"
Four years after the closing of a transaction...
"Four years after the closing of a transaction, when I hadn’t thought about the Company for years, I got caught spending time trying to somehow track down a signed version of some contract I knew nothing about that the Company had apparently entered into in 1999. After spending a long time trying to figure out where to even start with this mess, I spent hours trying to locate it. It was extremely frustrating, and I feel like I lost whole days to something that I view as a waste of time."
...issues surrounding the working capital balances and inventory/warranty reserves.
"I was a shareholder agent in a merger that ended up having issues surrounding the working capital balances and inventory/warranty reserves. I’m not an accountant, but felt like one after spending nearly ten hours a week for several months trying to decipher what happened and conducting interviews with all former executives and investors. This was not a fun process. I’ll never sign up for that again."
Everyone got very emotional and it wasn’t a good situation.
"Our shareholder representative was the former CEO of the acquired company. Twenty-four months later, after everyone’s memory had faded, the acquirer made claims on the escrow fund. The problem was that the shareholder rep now worked for the acquirer and didn’t want to get his hands dirty defending the escrow. Everyone got very emotional, and it wasn’t a good situation. To add to it, many of the principals with the investors had left their previous firms."
...fun of changing contact information forms for 85 former shareholders...
"There is nothing quite as fun as processing the change of address / contact information forms for 85 former shareholders of a closed investment to keep records up to date with the escrow agent."