How does this work?
The 2 0.5% shareholders need to maintain their % but we need to increase share capital
Company is not listed yet, it has just been incorporated but has some substantial assets
Replies (6)
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But what is the problem? Are
But what is the problem? Are the two 0.5% holders not willing to contribute 0.5% of the new capital?
Well they can't have it both ways. Why do they think they should each enjoy the benefit of 0.5% of new capital introduced by others - or why others should only enjoy the benefit of 99% of what they contribute?
If there are reserves then bonus shares can be issued but the holders of the other 99% would be entitled to 99% of the bonus shares so it would achieve nothing. The only way the two shareholders in question can avoid their interests being diluted is to reach an agreement with the other shareholders to, in effect, gift them 1% of the value they contribute. If the other shareholders are generous and kindly disposed to them that might work.
Classes of shares
It may be possible to achieve the same result by redesignating the shares held by the the 0.5% shareholders to a separate class of shares (say A Ords). The class rights could be established so that that class shares 1% of value/voting etc as appropriate and the other class (say Ords) shares 99% - the new shares then being issued as Ords without affecting the overall rights of the A Ords and just diluting the other Ords.
Seems complex but without knowing why important they retain 0.5% cannot say whether justified. Have certainly seen variations where trying to retain a 5% holding for Entrepreneurs Relief purposes.