We regularly help startups deal with these (annoying) types of issues here at. Without more facts it’s really hard to speculate on the consequences. As Dana cautioned, you should definitely contact a seasoned startup attorney given the gravity of the situation. I agree with Gil Silberman in that the former co-founder may just be adamant against signing any agreements on his/her way out. A company will typically provide some form of consideration in exchange for a former employee’s legal release. As such, you could try offering money/equity for his/her release. It obviously becomes more difficult if the former co-founder owns a significant portion of the company. If that’s the case, it’s even more imperative for you to contact an attorney to understand your options moving forward.
If you want a quick, painless way to seek affordable legal advice then check out our. We offer free consultations and fixed, flat-fee pricing to fit the needs of bootstrapping startups. Good luck – I hope everything works out for your company!