Principles and factors of the design of the company's equity structure

The principle of the company's equity structure design

Many people think that the job of lawyers is to avoid risks , Or how can we reduce losses after a risk event . But in fact , For engaging in commercial legal services , For lawyers who provide non litigation solutions , Our more work is to create value for the enterprise , By legal means , We are on a larger scale 、 Achieve the business purpose of the enterprise more efficiently . This is the problem of creating value , It's not just about reducing losses .

The first is to achieve business goals . Because anyone's business behavior will have a certain purpose , Our design scheme must start from the premise of realizing the commercial purpose , Last , It also tests whether the design scheme is reasonable 、 Is it the only standard suitable for this enterprise . in other words , Whether the business purpose can be achieved , It is a prerequisite principle for us to design the equity structure .

Achieve business objectives , Maybe many entrepreneurs themselves will think this is very simple , In the final analysis, the purpose of business is to make money . In fact, in the process of moving towards the ultimate goal of making money , We will have many phased purposes , Or our enterprise is not necessarily set up to make money , There may be other purposes , Or it doesn't make money directly through operation .

Let's briefly summarize , Some people may say that I just want to open a century old store , Have a brand and then have a sense of honor . Of course, this century old store will be linked with family businesses , For example, the old lady, the godmother, is determined not to move closer to the capital market , She just wants to be a century old shop , So her equity is firmly in her hands , She won't go public . There are also some family businesses , Maybe different industries have different requirements , Like Lee Kum Kee in Hong Kong , He will firmly grasp the control of this enterprise in the hands of their family , Because of the value and inheritance of brands in the food industry . Some people say that this company gives me shares , Anyway, now this equity investment is so fashionable , I design an investment company , Design a private fund management or investment management company , That is one of the purposes of the investment platform . Others are for the purpose of listing and financing , All kinds of enterprises , Will have some of his business purposes . But many entrepreneurs may not understand that in addition to making money, starting a company , I will also have other phased goals or other unexpected goals , Or I don't know how to achieve my goal .

The second principle is risk minimization . At the equity level , We should pay attention to three risks . One is Between partners The risk of infighting , There are too many such cases . second , Namely Between founders and employees , Because for enterprises, talents are now the most valuable wealth and the best resource , Many founders will share their equity with core employees , But many people simply give some equity , Some people may think a little more complicated , Do I engage in equity incentives , Whether to sign a contract . In fact, they are aware of this problem in both cases , If you think too simply, you may have many problems , Next we will carefully say . The other one is Founders and investors Risk between .

When designing the equity structure , We should try our best to prevent these three risks .

Let's talk about decision-making power first . At the beginning of entrepreneurship, everyone is probably the simplest , Distribute shares according to the proportion of our investment , Maybe this seems to be the most reasonable way , In fact, this thing is not necessarily Fair , Various problems may arise .

Both companies have experienced equity infighting between partners , Haidilao was successfully solved , True Kung Fu is sad . It's a very bad result for the founder Cai zhitan . Zhang Yong is the helmsman of Haidilao , He didn't pay a penny at that time . When Haidilao was founded, they were four people, two men and two women , Later, the two men and women magically became two couples , They were not married when they first invested . Zhang Yong didn't pay , The other three people are paying , But Zhang Yong earned another wife and another company . Zhang Yong and his wife occupied 50% Shares of , In the process of the development of the company, the two couples had a series of disputes because of the problem of halving the equity , In the process of this struggle, Zhang Yong has a very magical method , I don't know how to 1993 Shi Yonghong was acquired at the investment price during the founding period in 18% Shares of , It's a mystery , No one knows yet . The news said it was a magical thing . But in fact, this is not magical at all , I think it's easy to understand , Maybe it was There is no tax for the transfer of registered capital at parity Way to avoid tax , Otherwise, the registered capital of the company for more than ten years was so small , It is impossible to transfer at the original price , Now many companies transfer their equity in this way , After adjustment , Zhang Yong occupied Haidilao 68% Shares of , He and his wife account for the majority of the shares . Real Kung Fu Cai Xiangtan is not so lucky , These are some examples of typical equity disputes between founders .

In fact, these risks need to be avoided in the early stage of equity structure design . The risk of equity disputes is more from this equity incentive , Many people say that equity incentive is very simple , Many bosses are doing the same , I'll just give you some shares . This is a sincere boss , Because the boss who is willing to choose to directly transfer shares to employees is very real . Equity incentives may give many problems , Including many problems for the founders , It will also bring many problems to employees .

The issue of equity incentive is a special legal service , It needs special research , Now many external companies do this business better than us , Because they have more marketers , We have no marketing personnel, only R & D personnel , So we are sad to urge both marketing and R & D , We also need to do production management . Now Shenzhen XX company , The marketing scale is very large , Many of them buy several schemes from our lawyers and then take them , It's all over the place . In fact, if this thing is done according to our standards , We will first conduct a survey of the company , Then understand the industry of this company 、 The environment of development and other factors , Determine some things about the future development of this enterprise , Then talk with the boss to understand your purpose and some ideas for this equity , There will also be an interview with the awarded object , Because the ultimate goal of equity incentive is to tie valuable employees together , Can better start a business together , But if the design scheme only meets the needs of the boss , That will definitely not achieve this goal . So we will also have a negotiation with the granted object , After the negotiation, we will conduct an analysis , Finally, refine and find one that is beneficial to the development of the enterprise 、 Good for the boss 、 A scheme that benefits all three subjects of employees , Then go through a series of legal documents to determine it , This itself is a very complicated job .

The risks of founders and investors , It is mainly caused by the risk of financing failure and the risk of equity changes . The so-called risk of financing failure , Many enterprises want to raise money , But for some equity structures , Professional investors are not interested at first sight , Because your ownership structure is not suitable for him to enter . If he thinks your industry is better , He also appreciates your team , He will definitely ask you to adjust the ownership structure , I'm afraid he won't come if you don't adjust . Another is the impact of equity changes in the financing process , What does this mean ？ Many investment processes are accompanied by a very popular word called bet , There are many modes of gambling , One of them is to bet on equity . Adjust the proportion of equity in this transaction , This will lead to changes in the control of the company , The founder may lose control of the company .

The third principle of equity structure design is the maximization of interests . There are two major taxes , One is corporate income tax , One is personal income tax , It is closely linked with the ownership structure . The other one is Maximize the return of equity premium The problem of , The so-called equity premium is our capital increase, holding or transfer of equity , Or we transfer our shares after listing , There will be a huge premium in the middle , Then the maximum premium of this kind of equity will bring the same transfer of business tax and income tax base is very large , Business tax at least 5%, corporate income tax 25%, Individual income tax 20%, This is a large scale , Because its cardinality is very large , It's hundreds of millions or tens of billions , So the benefits will be great . If we consider these factors when designing the equity structure , You can pay as little tax as possible , Our design is legal to reduce some taxes .

What we have just said is mainly about the principle of equity structure design , In other words, we must focus on achieving business objectives , Risk minimization and benefit maximization are three principles for design , These three principles are also an end point of the final ownership structure design . Why is it both the beginning and the end ？ Because the final test is whether this scheme is suitable , Our final standard is also these three , If I can't achieve my business purpose, it's definitely not a good plan , If the risk cannot be minimized , Failure to maximize benefits is not a good plan .

Equity structure design elements

1、 The main body

The simplest is that natural persons directly hold shares , There are good and bad aspects of natural person shareholding , The two structures we just mentioned , After the company goes public , If you are a legal person shareholder, you don't need to pay tax if you want to pay dividends . However, if the legal person's shareholding is transferred, it is subject to tax , Natural person's direct share transfer is less than one tax , Because you have to pay enterprise income tax in the process of transfer through legal person shareholding , Then you distribute it to the shareholders , Individuals should pay dividends, dividends, profits and taxes 20%, So a total of 25% Add 20%, Synthesis is 40%; If an individual directly holds shares of a listed company , The transfer of shares after the lifting of the ban for a period of time , Only part of the personal income tax transferred , It's less .

There is also an indirect shareholder , There are two main types of indirect shareholders , One is the shareholding platform , These subjects are partnerships , Individual businesses can also hold shares , At the tax level, self-employed households have many benefits , It has a high tax seal , There is also a problem of treaty taxation , Treaty taxation can be achieved in many areas , Self employed households are a meaningful subject in tax planning . The other is To hold on for , To some extent, it is a personal platform .

Different subjects have different benefits , Each has its own value , This value is not just tax value , Others can hide their true purpose , Or divert your attention , So when we design the equity structure , Which entity will be considered to hold the shares .

2、 The proportion

About the proportion of ownership structure in China's company law , There are several core data . More than two-thirds are when the general meeting of shareholders makes major resolutions , For example, when revising core issues such as the articles of Association , It requires more than two-thirds of the voting rights to pass to produce legal effect ; More than one third is a veto , Because as long as it's more than one-third, you can't be more than two-thirds , Major resolutions cannot be passed ; More than half of them are from financial considerations , The capital market operates more than 51% You can consolidate the financial statements , There is also a relative right of control , Many decisions at the management level can be passed .

We have another legal aspect 10%, This 10% What are the benefits of our shares ？ Because a lot of times , After all, entrepreneurial failures still account for the majority , After some companies failed to start their businesses, the major shareholders did not know where they had gone , But this company is here , Now the new credit reporting system may have a lot of impact on minority shareholders , Greater than 10% We can apply to the court to dissolve the company . Another proportion is greater than 5%, This is not stipulated by law , It's a policy issue , There will be a restriction on information disclosure in the trading process of listed companies .

3、 agreement

This AB The design of the stock , It is very common in the United States , Because in the countries of Western common law system, they care more about the usufruct of this property , And don't care about the ownership of property .AB Setting of shares , In order that the founder can better control the company , At the same time, it can meet the continuous financing in the process of development , Most of these settings are Internet enterprises , Need to burn money .

One more Through the agreement, we can realize the delegation of voting rights and voting rights . Before jd.com went public, it was entrusted to Liu qiangdong for implementation , After listing, he adopted AB stocks .

Then it is often used by Listed Companies in our country ,“ Acting in concert ”, This can also be achieved by agreement .

Another is that we can control the change of equity through agreement .

The first three possibilities are often seen by people in the capital industry , The fourth possibility is rarely seen , Because the above equity is relatively stable , But when the following situations occur, these equities can be changed , How to control this change . We are in the process of financing , Many investors will give you these agreements in the investment list , Including when the founder started his business , Some mechanisms for equity maturity and withdrawal can also be agreed . Gambling can also be controlled by agreement , Because gambling can also lead to changes in equity . Equity transfer can also be controlled by agreement .

Type of equity structure

Balance the equity structure , That is, the shareholding ratio is relatively uniform , There is no core , This structure is unreasonable .

Highly concentrated structure , This structure may affect financing , This is also an unreasonable equity structure .

Moderate concentration structure , If you want to enter the capital market , This moderately concentrated equity structure is the most ideal .

Another unreasonable structure is the average decentralized structure , This is a little different from the previous balance , It will have a larger number of shareholders, but each person will have a smaller share , It is difficult to form a decision .

There is also a husband and wife shareholder structure , In front of our country 30 In the process of starting a business in , In many industries, 80% or 90% of enterprises are mom and pop stores , This may cause a great risk , That is, the company loses its legal personality , Limited liability of the company may require shareholders to bear .

Equity structure design of start-up companies

The design principles and elements we talked about earlier , For all companies , Here is a brief talk about some slightly different things about start-ups or start-ups , For start-ups, a direct or short-term goal we design is to To realize the control of this company, we need to coordinate , Balance with interests .

Ahead 1234 All points are elements of risk minimization , Then there is another obstacle to avoid listing and financing , Because some ownership structures will lead to related party transactions 、 Horizontal competition and other problems , We should consider this problem when we start up , Avoiding listing obstacles is also a problem that needs special consideration .

When the start-up company arranges the proportion of equity structure , There is one factor to consider , Most of us measure the proportion of our equity structure through money , But in fact, our partners invested , Many are giving money, things, time, experience, resources, ideas, intellectual property , How to quantify his contribution value , We can establish a corresponding data model to balance the contribution value , This equity structure design scheme also needs to be recognized by all partners , We just offer a possibility , That is, I will consider these issues , Whether you agree or not is another matter .

There are also part-time jobs between partners and co founders 、 adviser , I don't come to work , But it will also provide some benefits , How do these people calculate the value into shares .

There is also an angel investor who invests money , He cast 100 But I can only give 10% Shares of , This is also a calculation problem of capital contribution value and founder idea value .

There is another factor to consider , At the beginning of entrepreneurship , Should we give equity incentives to employees , Many enterprises just pull one to say how much equity I give you , In fact, equity is not necessarily attractive at this time , If you give it, you may have many new problems , Whether to give or not is also a factor that needs careful consideration .

There is another point to consider , This is the problem of the equity change mechanism . The problem that startups need to consider carefully , Because at the beginning of entrepreneurship, this kind of change factor is the most .

In the initial stage of entrepreneurship, the company's equity structure is more reasonable, which is a moderately centralized equity structure , Founders can own 60% To 70% Shares of , Then the co founders can occupy 20% About shares , The early reservation of employee incentive shall not exceed 20% It's reasonable .IPO If the equity is diluted in the previous financing process , Try to make the equity ratio of financial investors relatively balanced , This will also be conducive to the development of enterprises , Because it is difficult for every investor to agree , But if there are big differences , We can win over some people .