Changing Of Shareholders

[Zen]

Hi

I am holding 49% ORDINARY shares in my company while the remaining 51% are in PREFERENCE shares held by my close Thai friend who is just a "sleeping partner". We are registered with 2.1million baht capital.

Now there's another Thai person who wants to invest in my company. This person would like to play an active role in the running of my company as well.

I am thinking of offering this person 40% shares and I'm quite sure this person would want to have ORDINARY shares instead of PREFERENCE shares because of the voting rights.

If that's the case, does that mean I have to convert my "sleeping partner's" shares from PREFERENCE shares to ORDINARY shares so that this "sleeping partner" can be on my side should there be any problem coming from the new shareholder? I am sure that my "sleeping partner" will always be on my side but I'd like to be careful of the new share holder. I don't want any quarrels with the new shareholder.

What's the procedure like to change the share structure and to add a new share holder? Will it be complicating?

Are there any other issues that I should be aware of?

My company has been running for 3 years but so far I have not really put in all the 2.1million in capital.

[LaoPo]

Hi

I am holding 49% ORDINARY shares in my company while the remaining 51% are in PREFERENCE shares held by my close Thai friend who is just a "sleeping partner". We are registered with 2.1million baht capital.

Now there's another Thai person who wants to invest in my company. This person would like to play an active role in the running of my company as well.

I am thinking of offering this person 40% shares and I'm quite sure this person would want to have ORDINARY shares instead of PREFERENCE shares because of the voting rights.

If that's the case, does that mean I have to convert my "sleeping partner's" shares from PREFERENCE shares to ORDINARY shares so that this "sleeping partner" can be on my side should there be any problem coming from the new shareholder? I am sure that my "sleeping partner" will always be on my side but I'd like to be careful of the new share holder. I don't want any quarrels with the new shareholder.

What's the procedure like to change the share structure and to add a new share holder? Will it be complicating?

Are there any other issues that I should be aware of?

My company has been running for 3 years but so far I have not really put in all the 2.1million in capital.

You're playing with fire here. The eventual new partner and the sleeping partner together can put you in the street within a day.

Better let the new partner not yet invest and certainly not for such a large part in the beginning but let him join you against a salary for let's say 1 or 2 years and see how it goes.

Good luck anyway.

LaoPo

edit: are you offering 40% of the normal shares out of your own 49% or increasing the ORDINARY shares ? But, whatever the road you're walking, I wouldn't do it yet.

Let him proof himself first.

Edited August 27, 2008 by LaoPo

[Zen]

Hi

Thanks for the answer.

I was thinking of cutting 40% shares from my sleeping partner and offer this 40% to the new shareholder.

That means I will still hold 49% ordinary shares, the new share holder will hold 40% ORDINARY shares and my sleeping partner will hold 11% shares (which will be convertered from PREFERENCE to ORDINARY in order to give him voting rights in case the new shareholder does anything funny, my shares+my sleeping partner shares will have a total of 60% voting rights).

My sleeping partner doesn't know the new shareholder personally. Neither does the new share holder knows the sleeping partner. So it's quite impossible for the new share holder to gang up with the sleeping partner. (but if they ever, ever do, I'm dead?!)

What do you think about this plan? Any way to make things safer for me? Or should I only give PREFERENCE shares to both my sleeping partner and the new shareholder? Is that the only way? I'm not sure if the new shareholder will want to have PREFERENCE shares with no voting rights.