Hi guys,
With regard to selling equity in a company (in return for investment), my understanding is that there is a power threshold at 25%, i.e. if the investor owns less than 25% (and the other shareholder holds the remainder), he/she has no real decision making power. If he/she owns 25% or more, that person then has some say - pretty vague I know. Do any of you know anything about this? If, for example, the majority shareholder and day-to-day manager of business decided to pay themselves the business' profit as a directors fee, would the other investor have any way to contest this if, a) had less than 25%, b) had 25% or more.
I know there are different types of shares that have no voting rights but i'm wondering about the above situation with 'normal' shares.
ps i'm not about to screw someone here. Just want to know the facts so can explain situation to a newcomer.
thanks
Ger
With regard to selling equity in a company (in return for investment), my understanding is that there is a power threshold at 25%, i.e. if the investor owns less than 25% (and the other shareholder holds the remainder), he/she has no real decision making power. If he/she owns 25% or more, that person then has some say - pretty vague I know. Do any of you know anything about this? If, for example, the majority shareholder and day-to-day manager of business decided to pay themselves the business' profit as a directors fee, would the other investor have any way to contest this if, a) had less than 25%, b) had 25% or more.
I know there are different types of shares that have no voting rights but i'm wondering about the above situation with 'normal' shares.
ps i'm not about to screw someone here. Just want to know the facts so can explain situation to a newcomer.
thanks
Ger