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?

Entrepreneurship

Corporate Development

Corporate Finance

Answer

Tom Leung answered

You can do whatever is mutually agreed to by all the affected parties. That said, in general you want to keep things simple, standard, and nothing too exotic. Of course, if your usage and revenue numbers are doubling every month, investors will be a lot more flexible and just happy to get a seat on the rocket ship.