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I've never seen this happen myself, my information came from a previous discussion: http://news.ycombinator.com/item?id=1935641 http://news.ycombinator.com/ite

• chernevik 15y ago
  That clarifies things. The thread clarifies what I said: the documentation should have given shareholders the right to participate in otherwise dilutive equity sales, whether they're accredited or not. Anticipation of this sort of thing is why good lawyers are worth the money. But they're expensive, perhaps prohibitively for the amounts we're talking about here. So unless the majority shareholders are responsible, what shouldn't happen, does.
  • tptacek 15y ago
    Startups do not as a rule give their common shareholders the right to participate in future rounds. In part this is because they don't want to, but it's also because they probably can't. Companies can only offer and sell shares to reg-d accredited investors. The shares employees get are as compensation, which is explicitly exempted from SEC reporting regs.