Should I sign without reading first?

May 3, 2007 10:01 PM

The owner of the privately held company that I work for has decided that he wants to give out equity in the company to a select number of employees. This isn't hugely valuable right now but could potential be extremely valuable if the company were to ever go public. I have been selected to be a part of this group as I am an Officer of the company. My share would be worth $5000 currently. I get a certificate, etc. The point of all this is to have employees personally invested in the company to affect the way they conduct themselves based on that personal investment rather than working for someone else's money they are working for their own.

I think this is great and I am very excited. I am concerned about one thing though. This being a serious matter and a big deal for the owner of the company there is a 50+ page document that details the who deal. At the end of the document everyone involved signs as well as the owner. I am essentially being asked to sign off to this document without reading it first. I understand that it is very long and it's not anything bad, but I just am very stubborn about signing things and always like to read and understand them fully. The owner of the company is a close friend of mine and I don't want him to think I am questioning this deal. I really want to sign on and be involved but I want to read the document. I am told that after everyone signs we would get a copy. I am the only one that has not yet signed. Am I being a jerk? The reaction I am getting is basically that this is a bonus I am being given and that I should just accept it and not make things difficult by wanting to read this very long document that I probably won't understand anyways because it is so complicated. I'm not sure what to do because I love the company I work for and the people I work with and I want to be a part of it. I don't want the owner/my friend to think that I am not grateful for what I am being offered.

posted by anonymous to work & money (27 comments total)

IANAL, but my understanding is that anyone providing a contract for you to sign has to go to lengths to make sure you understand and read the contract. Offer and acceptance means you had to have an objective understanding. If the contract terms are uncertain/incomplete, there isn't a contract. This doesn't mean you're exempt from contractual obligations if you fail to read the contract, but it may leave the contract on shaky ground.

But don't sign anything without reading. Number and initial all pages of the contract, just so your signature is not appended to something.

Are you the only one who feels this way?
posted by acoutu at 10:11 PM on May 3, 2007

Don't sign things without reading them. Tell the owner that you love the company, but you don't ever sign anything without reading it, period.

Are they setting a time limit or will they just not let you see it? I don't understand why you can't just read it.
posted by LobsterMitten at 10:12 PM on May 3, 2007

No, you are not being a jerk. It is a 50 page document written in legalese. You are perfectly reasonable to expect a chance to read the document, and to get legal advice about it.

It's nothing personal -- you just want to know what you're signing.
posted by robcorr at 10:21 PM on May 3, 2007

Could you couch it in terms of, you know the company is treating this very seriously, and you are too--that you always make sure that you understand a contract/agreement so that you don't accidently find yourself in violation of it?

I'm wondering why, exactly, they would need such a long contract, and whether this is typical.
posted by Many bubbles at 10:22 PM on May 3, 2007

Accidentally, even.
posted by Many bubbles at 10:23 PM on May 3, 2007

You're an officer of the company, and they expect you to sign a legal document without reading it? Would they want you to conduct business on the company's behalf that way?

Don't sign it without reading it. You can make clear to your friend the owner that it's not a matter of being suspicious (although frankly I would be at this point) or ungrateful, it's just standard responsible business practice to read the thing.
posted by bac at 10:25 PM on May 3, 2007

Threatening to recind the offer if you'd like to read it first, or guilting you after the fact is coersive. Reading anything you're legally binding yourself to is a good idea. Obfuscating this into some ritual of trust isn't very professional. Explain that there wouldn't be a problem if it weren't so long. Most business agreements are a few pages at most, written in plain language. You're interested to know why that wasn't possible in this agreement. It's true and reasonable.

Show your greatfulness afterwards by bringing in a few tins of cookies and emailing the staff of your gift of congratulations. I doubt anyone would actually confront you before you get the cookie message out. And from then on, it would be ridiculous to question you.

"Hey, why'd you flake out yesterday?"
"Flake out? I'm really excited, actually! It's these almond cookies that are flaky!"
HAHAHAHA
...and scene.
posted by cowbellemoo at 10:32 PM on May 3, 2007

I am told that after everyone signs we would get a copy.

Unacceptable, and possibly illegal. This raises all kinds of flags for me. A "close friend" would give you a copy and tell you to read it.
posted by dhartung at 10:35 PM on May 3, 2007

Yes, I second dhartung. Anything that you are given a copy of AFTER you sign it is asking for trouble down the line, both for you and your employer. Try to get him to see that it is in his interest as well that everyone understands what it is about. Otherwise if something goes wrong (or right i.e. the company makes tons of money) down the line then he won't have to worry about a class action suit saying the entire group was coerced into signing a contract limiting their rights. Just my thoughts on the matter.
posted by occidental at 10:58 PM on May 3, 2007

Sign nothing that you do not read or understand. Here is the language that you use:

"I'm sorry, but it's irresponsible to sign a legal document without reading it. I won't do so, and I'm surprised you'd expect any officer of this company to do so. Is this a test?"

Since this is being presented to you as a way to involve your own sense of personal responsibility in the operation of the corporation, it is completely irrefutable.

I would resign from any company before I signed a 50 page document without reading it. And I would certainly run a 50 page document past my lawyer. Let's leave aside the unlikely possibility that the document is asking you to do something not in your best interests. There are still good reasons to read the document in full. For example, by signing you may be committing yourself to following certain rules, such as, say, not publicizing confidential financial details about the company's operations. If you are, you'll want to know about it, so you don't accidentally do something you promised not to do.
posted by ikkyu2 at 10:59 PM on May 3, 2007

There's no legitimate business reason to expect someone to sign something without reading it. They're probably just being lazy, in which case you should not feel bad about standing your ground. Tell them you want a day to read it first, or even an hour. It should not be a big deal.
posted by Nelson at 1:25 AM on May 4, 2007

Just to re-iterate what has already been said here. Don't sign. I am an accountant and work in professional practice. I have never heard of any situation like this (other than in episodes of Brotherhood) where you would be expected to sign something without having read it.

I would also apply the earlier advice of initialling every page and dating as appropriate. I would also want a copy of the report to review in my own time.

Anyone worth their salt would appreciate that you are only being diligent in the application of your duty as an officer of the company. I would argue not only is it good behaviour, but it is your responsibility as an officer of the company to give any documentation due consideration.
posted by ClanvidHorse at 1:46 AM on May 4, 2007

Personally I'd turn up with my own ten page document and promise to sign the bosses document if he'll sign mine. Then kick up a fuss when he insisted on reading it.

But then I've been made 'redundant' three times in ten years. :)
posted by twine42 at 2:20 AM on May 4, 2007

You'd probably be the first to end up with a load of bad debt, because you signed a document sight unseen when prompted by 'close friends'.

Or on second thought, maybe you wouldn't?
posted by NekulturnY at 2:21 AM on May 4, 2007

Tell them that you need some more time to show the document to your tax lawyer, in order to make sure that the stock grant doesn't have any tax consequences for you.
posted by fuzz at 2:21 AM on May 4, 2007 [2 favorites]

Trust goes both ways. If the owner thinks that you would already agree to everything in the contract without having read or understood it, then there's really no need for you to sign it, is there? He should just give you the money.
posted by grouse at 3:29 AM on May 4, 2007

Find out the legality asap then you can actually have a talk with your friend/boss from the context of actually doing him a favour by protecting him from negative legal consequences.
posted by biffa at 4:28 AM on May 4, 2007

50 pages is pretty damn huge for what is being presented as a simple equity gift. The size of the document alone makes my "get a lawyer" sense tingle.
He may be a good friend, but many a bad business deal have been built by "friends".

Get it checked-out.
posted by Thorzdad at 4:35 AM on May 4, 2007

I agree with everything above except this:

>IANAL, but my understanding is that anyone providing a contract for you to sign has to go to lengths to make sure you understand and read the contract.

In many states, by signing a contract you are bound by it, whether you read it or not, and whether you understood it or not. The law presumes that you accept its terms by signing, and will not hear you to say otherwise except in very limited situations. This is why the points made above are so important.
posted by megatherium at 4:38 AM on May 4, 2007

Are you being told that you "don't need to" read it before signing, or is the owner actively obstructing your efforts to read it prior to signing?

If the former, I think a simple clarification is in order. If the latter, I'd run like hell -- friends or not.
posted by Doofus Magoo at 4:41 AM on May 4, 2007

Well, don't let the 50 pages throw you off. We can't draft stuff that's any shorter, out of principle.

Others in your company are also affected - so pool your resources and split the cost of a lawyer who will review the agreement on your behalf (and make the phone call necessary to make sure you have an advance copy.)
posted by Saucy Intruder at 4:49 AM on May 4, 2007

Unacceptable. I regularly handle litigation involving directors and officers of public and private companies, and given the amount of this litigation and the likelihood of something going awry down the road, I would NEVER permit a client to sign a document like this without reading it first and consulting a competent lawyer.
posted by monju_bosatsu at 5:15 AM on May 4, 2007

All the advice so far is good. Don't even consider signing before reading the contract. Seriously consider hiring an actual lawyer to help you through it.

My share would be worth $5000 currently.

What basis do you have for this belief? Was there a recent up-round of funding that establishes this value? If they just set an arbitrary par value for the shares, it doesn't mean much. In addition to the 50-page legal agreement, you will want to take a look at the annual financial results.

This isn't hugely valuable right now but could potential be extremely valuable if the company were to ever go public.

IPOs are extremely rare these days. Much more common is acquisition by a larger entity. One of the fun ways a large company can acquire a smaller one is by purchasing its assets and hiring its employees, leaving an empty shell of a company and lots of worthless shares.
posted by b1tr0t at 5:44 AM on May 4, 2007

I am the only one that has not yet signed.

So, say you'll sign the document by lunchtime, take it to your office and read for four hours, making phone calls to your lawyer/tax consultant as needed. Tell them you like to understand thing as much as possible for the good of the company.

I guess I don't understand how this is "making things difficult".
posted by mikepop at 5:51 AM on May 4, 2007

If you're signing something, that means you're agreeing to something. In other words, you are indicating that you are responsible to DO something. Do you know what that is? If it was purely a "we want to give you $5000", they would give you a check (cheque). Don't agree to do something without knowing what that is, if you do, you deserve whatever happens to you.
posted by blue_beetle at 11:23 AM on May 4, 2007

I would NEVER ask a friend to sign a document without reading it and reviewing with their lawyer 1st. I also would not be invoved in a business with someone who conducted business in this fashion.

b1tr0t right on the money--the paper could be worthless in the end.

As a dear account friend of my says--get out when a company wants your money in this way.

I do not know your situation but RUN is what my gut says.
Good Luck
posted by dsaelf at 11:24 AM on May 4, 2007

50 pages is really quite long. Really long for a stock option agreement.
posted by Freen at 1:55 PM on May 4, 2007