As with any business venture, the agreements you make with your partners are important. However, having the wrong, or even no, partnership agreement from early on can be disastrous. A WeChat post that has been flooding Chinese social is a sad testament to this rule.
Under the tear-inducing title “Even if my husband didn’t make a penny, he’s still the best entrepreneur in my heart”, the post was published by Emily Liu, the wife of an entrepreneur. In a couple of hours, the article was read by 100,000 WeChat users and collected nearly 50,000 likes.
Emily’s husband launched a startup with partners in 2010. As the number 2 employee of the company, he is acting as co-founder and CTO. The author gives a vividly and touching description of the hardships her husband and their family went through along the growth of the startup.
However, as the business started to thrive, things got ugly among the founding team. After a talk with company CEO, Emily’s husband failed to gain the share options his partner has promised previously and was stuck with only two choices: either leave the company with nothing or stay with a slim salary.
She also pointed out the company’s CEO is playing tricks with them by secretly setting up a new company which he has full ownership.
Although Emily was writing under a pseudonym, China’s powerful netizens soon discovered the true identity of the couple. There’s plenty of clues left in the post: a mobile gaming company and having received funding from both Sinovation Ventures and Sina. To top it off, she even attached a post of their family at the end of the article.
The author’s husband was widely guessed to be Han Donghui, CTO of game developer ZCTTECK GAMES with his CEO partner as Chen Yuxiang. Local media revealed that the two were once colleagues at BBS platform operator Comsenz before starting their entrepreneurial journey.
Chinese social networks are full of indignation about how Han was ill-used and screwed out of the shares that his hard work deserves. People with knowledge of the affair are also adding fuel to public indignation.
Li Mingshun, the founder of Haodai.com who once worked with the two entrepreneurs at Comsenz, went so far as to refer to Chen as “a piece of trash” in his personal WeChat. He added that Han is not the only one and some investors were also screwed by Chen.
But others believe (in Chinese) believe Han has no one to blame but himself.
“Working in a company for seven years as part of senior management and still having no idea about how many shares you own in the company? That’s ridiculous, not only for Han but also for the CEO and investors,” said one commentator. “Because holding share options does not only mean how much money you are going to have from the company but also the responsibilities you are going to take. If the company goes bankrupt, you have to pay for the debt as well.”
At the center of the storm, company CEO Chen Yuxiang responded with his side of the story. Chen admitted his management wasn’t impeccable, especially in delaying the share option plan, but he did defend himself. He said ZCTTECK GAMES has already distributed 2 million RMB of dividends to Han in 2013, instead of 1 million RMB as claimed by Emily. Chen emphasized that Han has been less motivated since then and several important projects of the company have failed under his leadership.
No matter which side you take, one lesson should be learned from the incident: Even though you are starting a business with your best friend, it’s necessary to have partnership agreements in place to outline each party’s role and obligations as early as possible, ideally at the very beginning, but certainly, before it accumulates profits or bake debts.