作者:公司法律师许光    发表时间:2019-01-17 11:02:40    当前栏目:公司治理    来源:    阅读:
  Nanjing Corporate Lawyer has provided legal consulting service for enormous companies,especially the start-ups.Many start-ups might concern the issues with respect to the share proportion distribution.Whether the founder of a start-up should control the majority equity of this company?Should the founder allow the investors to hold a majority proportion of shares?Let’s take a look at a practical case and then make analysis.
  There used to be a online retailing start-up which aimed at creating market demands via selling the best quality products to the clients.The retail start-up developed rather well and very quickly became the target of the venture capital funds.A VC fund chose this start-up and decided to invest,but required the start-up to transfer over 80%of shares.The start-up agreed.Several years later,the start-up moved toward a direction opposite to the founders,and finally disappeared in the market.The tragedy came about because that the founders did not know how to protect their own discourse of power inside the company.
  A client ever asked me:whether he should accept 2 million yuan’s investment provided by a VC fund while the VC fund required to hold an equity of 70%.He was really in emergent need of money but even if he did not get the investment immediately,his company could keep running for at least for one year.Nanjing Corporate Lawyer told him that you should very cautiously consider that.When you accept this offer,you must lose the control over your company,and you cannot determine the future prospects of your company.According to my experiences,in the very early stage of investments or financing process,it’s highly undesirable for the founders to accept to so easily lose control over the company.Otherwise,the investors will determine the directions of the company,which may probably contradict with your original designs.He finally rejected the investment,and several months later,some other investors came with more favorable conditions,allowing him to maintain majority proportion of shares.
  We can design some frameworks in which we can attract the investors to make investments into our start-ups while we can still keep the controlling power over the company.Here are several main forms of framework we will provide for our clients when it comes to maintaining the shareholding proportion or the voting rights:
  1.Class A/Class B shares
  Most companies set the shares as the shares of the same rights to dividends,voting rights and other relevant benefits.In practice,we always suggest that company could choose to set Class A and Class B shares.This model divides total shares into different classifications and define different classes in terms of different rights as refers to voting rights,priority in obtaining dividends,etc.
  For example,if you are going to introduce some investors,we allow the investors to hold Class B shares,which are allowed to gain the dividends prior to common shares,but Class A shares to be held by the founders of the start-up will have as many as 10 times voting rights as Class B shares.This arrangement ensures the investors of their preferential investment benefits as well as satisfying the founders’desire to maintain control over the corporate affairs.
  2.Entrusted Voting Rights or Persons Acting in Concerts
  Founders and investors may sign an agreement in which the investors agree to entrust their voting rights to the founders and founders then act as the representative of the investors to determine most important issues of the company.Meanwhile,there is also an arrangement that the founders and investors are tied together in a closer way:they can sign an agreement to act as“persons acting in concert”.That means in every shareholders’meeting,they shall cast the votes in same position,otherwise the party who breaches the agreement will have its voting as invalid and such voting shall be deemed as consistent with the complying party.
  3.virtual stock
  The founders can issue certain number of virtual stocks to provide incentives for important employees in the company,such as technological directors,marketing directors,financial directors or other important officers.Virtual stocks are not to be registered with the industrial and commercial authorities,and then should only be deemed as having similar nature with remunerations or bonuses.The employees are allowed to buy the virtual stocks at a favorable price,or be granted such stocks for free,and they have to allow the company to redeem such stocks when the period for holding such stocks expires or they are going to leave the company.They can only gain the benefits calculated based upon total number of virtual stocks and distributable profits,rather than having any voting rights or relevant benefits or powers granted to actual shareholders only.

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