Share Answer — Clarity

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Question

When we formed our corporation we issued voting shares to myself and the other 2 partners. I am at 51% ownership and the other 2 are at 29 and 20%.

One partner is going to put in another cash investment but obviously wants more equity for that investment. I am unwilling to give up any of my 51% control as it was my invention, I do 70% of the work and have all the vision. Our share structure is unlimited for both classes so can we simply issue him x amount of non-voting shares to increase his equity?

That would bring his equity up to 33% from 20%, the other partners down to 24% and mine down to 43%. However, what I understand based on my numbers, his 'voting' percentage would only be 17% and that combine with the other partner's 24% would only be 41% vs my 43% still leaving me in ultimate control. Am I understanding this right?

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Answer

Adeel Javaid answered

The new ratio of 33%, 24% and 43% will be the profit sharing ratio, the voting rights of founder will not be diluted anyways. The issuance of non-voting stock only entitles the grantee to take an additional share in profit of company but the voting rights of founder will be the same as were before the issuance of such stock.