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> The myth that "having lots of shareholders increases costs too much" is also just a myth. No, it isn't a myth. I used to work for a company which had to re-i
by beagle3 11y ago
> The myth that "having lots of shareholders increases costs too much" is also just a myth.
No, it isn't a myth. I used to work for a company which had to re-incorporate for various reasons, and had three shareholders too many; They managed to buy them out before the reincorporation, but it was a big problem (with lots of drama), and if an agreement wasn't reached, the company might have had to fold, and would definitely not have been as profitable, if it couldn't reincorporate.
IIRC, in the US it's 500 shareholders; We were subject to laws in several countries, the minimum of which had 40 shareholders trigger these problems. Regardless, it is not a myth -- having lots of shareholders has weird and unexpected costs.
- scurvy 11y agoIt's a myth. The US JOBS act removed the 500 shareholder disclosure trigger. It's 500 unaccredited or 2000 total now. You might have been forced to fold for reasons, but having 500 shareholders wasn't one of them. Going out on a limb here, but it sounds like there were lots of other serious problems and cap table length was a minor one.
- ekanes 11y ago> We were subject to laws in several countries, the minimum of which had 40 shareholders trigger these problems. They couldn't have more than 40 shareholders, and they quite clearly were affected by this.
- beagle3 11y agoThis was 2007, before the JOBS act. The company had 43 shareholders. It was subject to laws in a different country, that had the same "500 shareholder disclosure" trigger at 40 people (but the disclosure would have made it to the US as well, being public). Also, the JOBS act is from April 2012. Almost every ESOP, ISO etc. plans in effect today were prepared and enacted before the JOBS act.