I'm about to enter a partnership with someone. The original proposal was to be 50/50 partners, but now he wants to split the company into voting and non-voting shares. He would be effectively issue 100 voting and 100 non-voting shares. He would like to inject $100,000 of his own money to help jump-start the business. In the end he would own 100 non-voting and 50 voting shares, leaving me with the remaining 50 voting shares, and effectively 25% equity. I have also indicated that over time (if possible), I would like the right to buy back the other 25% equity to fully even it out. How can I protect myself in this scenario?
My first question to you is what are you trying to protect?
It sounds like you are trying to protect your controlling interest in the company. If that is the case you will accomplish the same thing if you have 50% of voting shares or 50% of total shares. You are in the same position either way. It will take both of you to "do" anything with regards to corporate actions.
You obviously will only have half of the ownership though under the scenario you presented. So if you are OK with that I don't think you have much to worry about.
Answered 10 years ago
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