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If a company is setting up by several shareholders, the number of shares held by each shareholder will determine:
— who have a decisive influence on decision to the distribution of profits and the payment of dividends;
— who have a decisive influence on decision to the appointment or removal of the CEO;
— who determine due to the change of the company’s capital, reorganization, liquidation, etc.
Learn about several stock distribution models:
— 50% + 50%. With two shareholders in a company, such a allocation of shares can cause difficulties in the event of disagreement between shareholders, as neither can have a decisive influence on decisions that are important to the company. If one of the shareholders is a CEO of the company, the management of the company is in his hands and he has the opportunity to act in his favor, while the other shareholder has almost no means of influencing either the company’s activities or the distribution of profits.
— 33%+33%+34%. With such a share allocation model, the company may get stuck making decisions that require a qualified majority, for example, distributing profits requires at least 2/3 of the votes, so two shareholders with 33% each will not have enough votes to realise such a decision.
— For some decisions, the law provides for a majority of at least 3/4 of the votes, so a 25% stake may be significant in making important decisions for a company. The articles of association may provide for more decisions requiring a 3/4 majority, thus giving more control to shareholders holding 25% of the shares.
Please note that votes are not counted from all, but only from the number of shares held by the shareholders present at the meeting. Thus, with the participation of not all shareholders in the general meeting of shareholders, a small number of shares gain more importance.
The setting up of a company is not only the registration of documents in the Center of Registers. Decisions made during start-up can have a significant impact in the future, so be careful.
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