We fix the agreement of the Founder of the business and a third-party investor
The risks posed by the lack of proper regulation of relations between business owners have been devoted to more than one issue of our newsletter. As well as the methods of legal consolidation of partners ’agreements, ranging from“ direct appointment ”instruments – shareholder agreements and agreements on the exercise of participants’ rights, to the features of certain legal forms (for example, business partnerships) and intricacies in relations between the parent and subsidiary companies. But the further the development of Russian medium-sized business and the legal literacy of its owners goes, the more questions there are.
At the same time, more and more tasks from the category of “how to regulate relations between partners at the start.” As we decided one of them – we show on an example from practice.
The founder of the business intends to include an authoritative person (Investor) with a majority stake in the company’s participants in order to counter pressure on the business. It is assumed that seeing a respected person among the owners of the company, the appetites of ill-wishers will decrease. The payment for such participation in the business should be official dividends. At the same time, the Investor agrees to invest 10 million rubles in the development of the business, the return of which he is entitled to when he withdraws from the membership of this company. In turn, all control over the activities of the company should still be concentrated in the hands of the Founder of the company.
Moreover, the entry model of such an Investor must simultaneously solve the following problems:
provide the Investor with the maximum (majority) share in the authorized capital of the Company;
to maintain the owner and operational control of the Founder over the company in full, preventing the arbitrariness of the Investor;
in the event that the Investor leaves the company, it shall be possible to return only the deposited amount of money (no less, but no more) without the right to demand from the Company payment to him of the actual value of his share;
ensure the legal tax-free entry and subsequent exit of the Investor;
exclude the possibility of third parties joining the company without the consent of the Founder.
Our version of the legal “packaging” arrangements:
1. The mechanism of entry of the Investor into the Company
The founder of the business makes a decision to increase the authorized capital of the company due to the cash contribution of a third party – the Investor in the amount of 10 million rubles. based on his application for joining the Society.
When increasing the authorized capital, we took advantage of the fact that neither the Law “On LLC” nor the Civil Code of the Russian Federation prohibits the founders from making contributions to the authorized capital that significantly exceed the amount of the nominal value of the received share paid by them. The only restriction is that the nominal value of the share (authorized capital as a whole) should not exceed the value of the property paid as payment, which was determined by an independent appraiser (clause 2 of article 15 of the Federal Law “On LLC”).
Thus, it is possible to increase the authorized capital of 10 thousand rubles by 10 million, but to keep the Owner agreed with the Investor 10%.
As a result, shares in the company were distributed between the Founder and the Investor as follows:
the Founder of the business left a 10% stake in the authorized capital of the Company;
in turn, the Investor received 90% of the authorized capital of the Company with an actual value of 10 million rubles, but a much lower nominal value.
This method has several advantages over the usual purchase and sale of a portion of a share in a Business Owner:
A) with an increase in the authorized capital, there are no tax risks that the tax authorities will recalculate the transaction price under market conditions that are present when buying a share at face value (at a price lower than the actual value of the share);
B) the necessary investments go directly to the company;
C) regardless of the size of the nominal value of the share in the authorized capital of the Company, the costs of the Investor recognize the entire amount of money deposited, which gives advantages in the event of the Investor’s subsequent “exit” from the business;
D) the decision of the sole participant of the Company to increase the authorized capital is subject to mandatory notarization, but the cost of this is lower than when certifying the share purchase and sale agreement.
Despite the fact that the Founder retains a minority stake in the company, all the levers of operational management should remain with him.
2. Providing owner control of the Founder over the business and actions of the Investor
To this end:
the Charter of the Company enshrines a number of special provisions;
between the participants of the company – the Founder and the Investor, a corporate contract is concluded.
So, in the new edition of the Charter of the Company the following provisions are fixed:
(A) unanimous vote on all issues falling within the competence of the general meeting of members of the Company. This is necessary so that the Investor, having a majority of votes, could not make a decision without taking into account the opinion of the Founder. That is, on all issues, he has the right to block the uncoordinated decisions of the partner;