5 ms·

If you give up your 51% share, sure.

gogopuppygogo 5y ago
If you give up control. Weighted shares let a minority shareholder have more than controlling vote in a company. It is always important to understand the fabric of your company by reading, understanding, and following the terms of your Operating Agreement or Corporate ByLaws. Manager Managed LLC vs Member Managed LLC vs C or S Corporation are most common entity types. Use the right structure to best protect your interests.
onion2k 5y ago
51% isn't quite right. For a start, it's really "more than 50%", which is often 50% + 1 share, but in some structures there are different classes of shares with different voting rights. It's common to have a pool of voting shares that are issued to founders and preferred investors, and then non-voting shares that are issued to everyone else. There can also be shares that confer more than 1 vote to the owner. You really need > 50% of the votes rather than any particular amount of shares.
- vineyardmike 5y ago
  > 51% isn't quite right. For a start, it's really "more than 50%", which is often 50% + 1 share Most people describe "50% + 1" as 51% even though its not quite right, but everyone understands 51% as a shorthand for "greater than half, not inclusive of half". Eg. a 51% attack on a crypto network is the same way.
- Jugurtha 5y ago
  >It's common to have a pool of voting shares that are issued to founders and preferred investors, and then non-voting shares that are issued to everyone else. To your point about differences in classes, there may be a class with 10 votes per share, another class with 1 vote per share, and another class with 0 vote per share.
- toomuchtodo 5y ago
  Common shares can also have one vote, or more than one but less than individual founder shares, with loss or decline in votes upon transfer.
ganeumann 5y ago
Very few things in a VC-backed startup require a shareholder vote. Firing the CEO is not one of them (this is a board vote.) Electing directors to the board is not one of them (this is usually the subject of a voting agreement that ensures board representation by the VCs.) Let's say the company raises money from VC1, who buys 20%, leaving you with 80%. The contracts add VC1 and an independent to the board, alongside you. Later the company raises money from VC2, who buys 20%, leaving VC1 with 16% and you with 64%. The contracts add VC2 to the board. Now the board is VC1, VC2, an independent, and you. If the VCs can convince the independent director to vote with them, the board can fire you, even though you own 64% of the company.
- VRay 5y ago
  How does that work? Couldn't you fire the board and reinstate yourself if you wanted to at that point?
  - PeterisP 5y ago
    It works by having you sign a shareholder's agreement (at the point of investment) where you commit to voting in a certain way for certain key issues, including the structure of the board. Investment is usually not only a contract between the investor and the company, but also a contract between the (new) shareholders. You would be required to support "their representative" to be on the board, no matter how many percent of shares and votes you and they had; and then the board has the rights to govern the corporation according to the corporate bylaws.
  - Tyr42 5y ago
    Ask Rogers, the board just tried to fire the CEO, the CEO just tried to fire the board, but those elections happen at a different time, and the CEO need the trustee of the family shares to agree. It can happen
- nowherebeen 5y ago
  How is that possible? Shouldn't it be the number of voting shares you hold? I thought that was the entire reason for share classes. It can't be based on the number of bored members alone, can it?

If you give up control. Weighted shares let a minority shareholder have more than controlling vote in a company. It is always important to understand the fabric of your company by reading, understanding, and following the terms of your Operating Agreement or Corporate ByLaws. Manager Managed LLC vs Member Managed LLC vs C or S Corporation are most common entity types. Use the right structure to best protect your interests.

onion2k 5y ago

51% isn't quite right. For a start, it's really "more than 50%", which is often 50% + 1 share, but in some structures there are different classes of shares with different voting rights. It's common to have a pool of voting shares that are issued to founders and preferred investors, and then non-voting shares that are issued to everyone else. There can also be shares that confer more than 1 vote to the owner. You really need > 50% of the votes rather than any particular amount of shares.

vineyardmike 5y ago
> 51% isn't quite right. For a start, it's really "more than 50%", which is often 50% + 1 share Most people describe "50% + 1" as 51% even though its not quite right, but everyone understands 51% as a shorthand for "greater than half, not inclusive of half". Eg. a 51% attack on a crypto network is the same way.
Jugurtha 5y ago
>It's common to have a pool of voting shares that are issued to founders and preferred investors, and then non-voting shares that are issued to everyone else. To your point about differences in classes, there may be a class with 10 votes per share, another class with 1 vote per share, and another class with 0 vote per share.
toomuchtodo 5y ago
Common shares can also have one vote, or more than one but less than individual founder shares, with loss or decline in votes upon transfer.

ganeumann 5y ago

Very few things in a VC-backed startup require a shareholder vote. Firing the CEO is not one of them (this is a board vote.) Electing directors to the board is not one of them (this is usually the subject of a voting agreement that ensures board representation by the VCs.) Let's say the company raises money from VC1, who buys 20%, leaving you with 80%. The contracts add VC1 and an independent to the board, alongside you. Later the company raises money from VC2, who buys 20%, leaving VC1 with 16% and you with 64%. The contracts add VC2 to the board. Now the board is VC1, VC2, an independent, and you. If the VCs can convince the independent director to vote with them, the board can fire you, even though you own 64% of the company.

VRay 5y ago
How does that work? Couldn't you fire the board and reinstate yourself if you wanted to at that point?
- PeterisP 5y ago
  It works by having you sign a shareholder's agreement (at the point of investment) where you commit to voting in a certain way for certain key issues, including the structure of the board. Investment is usually not only a contract between the investor and the company, but also a contract between the (new) shareholders. You would be required to support "their representative" to be on the board, no matter how many percent of shares and votes you and they had; and then the board has the rights to govern the corporation according to the corporate bylaws.
- Tyr42 5y ago
  Ask Rogers, the board just tried to fire the CEO, the CEO just tried to fire the board, but those elections happen at a different time, and the CEO need the trustee of the family shares to agree. It can happen
nowherebeen 5y ago
How is that possible? Shouldn't it be the number of voting shares you hold? I thought that was the entire reason for share classes. It can't be based on the number of bored members alone, can it?