Company share structure?

[Willieb83]

Hi,

My question is regarding share structure of a new company. In short, the proposed company will involve 3 inital members but I want to structure it offering share capital should certain goals be met. The company has a product A (created and managed and the first product that will be used to build the brand), hopefully once this is launched and successful we will look to launch product B (another member) and product C (the final member). I want to retain a key interest in the company in the early stages in case the other two prodcuts don't come to fruition but reward the other members with 33% share of the company if they do come through. What is the best way of structuring this? My thoughts were to issue A shares and B shares. The A shares would be 100 shares, me retaining 80 of them and 10 to each of the other parties and have full voting rights and full dividend rights. The B shares would have no voting rights or dividend rights but could be convertible to equal share of equity in the A shares if certain targets met. Is this possible and is this the best way to do this. All help appreciated.

Many thanks

 

[The Resolver]

Not convertible shares as such but you could have an agreement to issue more A shares on a certain event. The challenge will be how to set the target so that it can be clear and beyond dispute when it is met. You also may want to ensure the target is not met whilst unexpected events occur to suggest it will not be the success you had anticipated.

I would keep the share structure simple with just the Ordinary class and have a well drawn up agreement for the issue of more shares. This will be part of aShareholders Agreement that covers all the other issues you would need to cover - see my section at www.boardroomresolve.com

 

[Willieb83]

Thanks for the response Resolver. Why would you steer away from the different classes of shares? is there any particular reason. the reason I wanted to do that was to avoid issuing voting and dividends rights. Thanks in advance

 

[obscure]

Thanks for the response Resolver. Why would you steer away from the different classes of shares? is there any particular reason. the reason I wanted to do that was to avoid issuing voting and dividends rights. Thanks in advance

I think the point was that it is unnecessary if you have a proper agreement. They meet the target, the new A shares get issued.

Also the B shares may not have voting or dividend rights but they are still shares and would have a value if the company were sold. So, if these people failed to meet their targets they would still be rewarded if the company was subsequently sold.

 

[LawSpark]

Hi Willie, if it is a new company and you are considering share structure, have you got a lawyer involved to help amend your articles of association? If so your lawyer should be able to help you out with this. As you probably already know it is also a really good idea to get a shareholder's agreement drawn up.

If you are looking for a lawyer we can get you some competitive quotes for this. We are a free website which lets you post job ads which UK lawyers can respond to with quotes - we are currently used by a lot of lawyers who specialise in startups.