Rejig of company CAP table

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Hi,

Background

I am a startup founder and founded my company in late 2015. I raised capital from a Singapore entity in 2017 and they held 50% and I held 50%. Subsequently in 2019 we had a rights issue and they invested and are currently sitting at 60% of the CAP table, while I am at 40%. The face value of the share is 10 and share premium is at 40. So the fair market price is Rs.50. Our Authorise capital is 60Lakhs and Paid Capital is 50Lakhs

We are planning raise capital from other investors and the new investors have asked me to rejig the cap table and want me to hold majority stake in the company. I do not have funds to purchase shares from the investors nor investment more money in the company now. 

I have not taken salaries from the company for the last 2 years and they have been accrued in the books of accounts.

I would like to know what is the legal way out.

Questions 

1. Can the Singapore entity assign shares to me for a consideration that can be paid over a period of time agreed between us?

2. Will there be a tax implication when the shares are assigned to me?

3. Can the valuation go below the Fair Market Value for Rs.50

4. Since the valuation of the company now is increased from the last time we raised capital. Can we still stick to the old valuation for this transaction alone and subsequently look at a different valuation for other interested investors.

5. Is it possible to issue shares on behalf for the pending salaries at the face value. I am ok to pay TDS on the amount.

Could you please advise on the possible way out of the situation and request you to advise on the series of steps if any, that I need to follow. 

Appreciate your response and help.

Regards,

Sandeep

Replies (1)

Sry about the situation. You don’t have control in the entity and hence, you are required to purchase the shares equivalent to 10%. 

1. Ya, can buy shares under share buyback scheme, apply for scrip dividends, or, become partners with someone if company laws allow it to use additional capital to buy back the stake. Next, use share exchanges, a bank loan, debt to buy back shares, 

2. Check out the securities transaction tax laws

3. Find out the intrinsic value of shares by the year end

4. I don’t think so

5. You can have them as share based payments instead and exercise them through share exchange of your shares if the company laws allow


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