Company Shares & Control Question

[murmy]

I know a lot of you have experience in this so I want to run it by you.... I have the fortunate situation of two investors who are competing to invest in a project of mine.

They both (independently) want to invest and want a 55% share in my business which would give them control.

What would be the situation if I allowed them both to invest the same sum and gave them 40% each of the share capital and I retained 20%? Then who has control and how are decisions within the entity handled?

GUY1: 40%
GUY2: 40%
ME: 20%

Does this mean that only if GUY1 and GUY2 have agreement then the motion is carried? What if GUY1 and ME have agreement on something, is it sufficient to carry the motion (at its 60% shares owned by us both)?

[Leosghost]

Depends if they are "voting shares"" or "non voting shares" ..Normally investors would get "non voting" ..if you get your deal right :)

[piatkow]

On the face of it you have effectively sold your business. There are ways around this but the law will vary according to what jurisdiction you are in. You need to take local professional advice.

[httpwebwitch]

I agree with piatkow - this is the stage where you need to get a lawyer involved.

[murmy]

Well let us say that the formation is:

Investor1: 40%
Investor2: 40%
ME: 20%

What if we all have voting shares? Does this mean that if ME and Investor2 agree to do something, it gets carried even if Investor1 disagrees?

[Leosghost]

yes

[Leosghost]

however it would be much simpler to operate in the real world if you just sold them both equal sized blocks of non voting shares ..

You really do need to talk a lawyer specialised in company formations in your jurisdiction though as previously suggested ..it sounds like you are anticipating specific friction ..before you begin ..which is not a good basis for any joint undertaking ..

BTW..If the investors are family ..then dont ..( loans maybe ..even so best avoided..voting stock ..no )..now go see a lawyer .