Equity Design and Equity Legal Traps (Lesson 1: Concert Party Agreements)

I. Common Unreasonable Equity Structures

1. The 51% and 49% equity structure of a company seems to be a very good equity structure, but in fact it is the worst equity structure. If an investor enters the company and increases the capital by 5%, then A is 48%, B is 47%, and C is 5%, which may result in a situation where C has the last word.

2, A15%, B17%, C23%, D35%, it looks like D has the last word, the actual ABC joint will take out D.

Second, the nine lifelines of equity

1, absolute control of 67%, which is equivalent to 100% of the power to change the Articles of Association / separation, merger, change of the main project, and major decisions.

2, relative control 51%, the line of control, absolute control of the company.

3, security control 34%, veto power.

4, 30% public company tender offer line.

5, 20% significant interbank competition warning line.

6, 10% of the right of temporary meeting, can be questioned / investigation / prosecution / liquidation / dissolution of the company.

7, 5% significant shareholding change warning line.

8, 3% of the right to make temporary proposals, in advance of the small meeting.

9, subrogation rights 1%, also known as derivative litigation rights, can be indirectly investigated and prosecuted right (bring the supervisory board or the board of directors to investigate)

Remarks: Attend the shareholders' meeting, the limited liability company 1/2 majority on it, 1/2 refers to not the number of people, but the proportion of shares held.

Third, the concerted action agreement

1, Case: Zhenkongfu (Cai Dabiao)

Shareholding disputes triggered by the "case of blood" - Interesting Zhenkongfu shareholding disputes (web article)

In 2011, Cai Dabiao and other people are suspected of being involved in a dispute over a shareholding in the company. In 2011, Cai Dabiao and others were arrested by the police on suspicion of misappropriation of funds, job misappropriation, etc. Pan Yuhai took over Zhen Gongfu. 2014, the Guangzhou Intermediate Court made a final judgment, and Cai Dabiao was sentenced to 14 years in prison. Around the control of ZhenGongF, Cai and Pan launched a fierce battle between the two forces. During the period of disregard for the overall situation to tear down the stage, "shelling plan" dark war, equity transfer scam ...... open fire, dark arrows, step by step, compared with the current courtroom drama, there is no better.

And the initial cause of all this is only a simple two words - equity.

Can *** suffering and can not *** rich and powerful, in the Chinese business soil, the bane of the real Kung Fu in fact from the beginning that has been planted. The initial stage of the establishment of the company, the distribution of equity is unreasonable, did not sign a clear rights and obligations of the "partnership agreement", did not take into account the later company due to the development and growth of all kinds of conflicts, so that all parties in the face of the temptation of huge benefits, who also refused to give in, and finally should be a successful entrepreneur of the inspirational story, but because of one step wrong and step wrong, and finally jailed to become the people's tea time after dinner! "The first time I've seen this, I've seen it in my own life.

Although in the end, Pan Yu Hai's power to dominate, it seems to have been determined, in fact, both losses - infighting so that the development of Zhenkongfu slow down, poor financing, listing setbacks, valuation of the shrinking, the loss of a good game, almost by the later rise of small businesses "uprooted". The company's development was slowed down by poor financing. Some diners who are familiar with Zenkungfu may have the feeling that the dishes have hardly been updated. The husband and wife, relatives, and finally had to be unhappy or even in jail. At the end of the day, this equity war, there is no winner, each other have lost their families, lost their reputation, lost their money, and even lost their freedom, so-called lose a wife and lose a soldier ah!

We must be very curious about what kind of story this is.

Long long ago......

The story begins in 1994...

In 1994, there was a dessert store on the street in Dongguan. The founders were Pan Yu Hai, Cai Dabiao and Pan Minfeng, Pan Minfeng was Pan Yu Hai's sister and Cai Dabiao's wife. Shareholding structure for Pan Yu Hai accounted for 50%, Cai Dabiao, Pan Minfeng husband and wife accounted for 50%. Dessert store development to a certain stage "computer program-controlled steam cabinet" introduced into the Chinese fast food cooking, to achieve the standardization of Chinese fast food, large-scale processing, the original dessert store has also been able to metamorphose into a standardized Chinese fast food chain, and reorganized as "Dongguan City, Double Seed Catering Co. "began to expand rapidly in Dongguan. Pan Yuhai served as chairman and president of Double Seed, the shareholding structure remains unchanged.

In the initial stage, the chef born Pan Yu Hai always mastered the restaurant's dominant power , we have opened a restaurant know that the chef is the soul of a restaurant. But in the "computer program-controlled steam cabinet" to achieve the standardization of Chinese fast food, the enterprise scale is getting bigger and bigger, the dependence on Pan Yu Hai is getting weaker and weaker. On the contrary, with the expansion of the scale of the enterprise, Cai Dabiao in the layout, strategy, planning and operation of the talent can be reflected, and gradually strengthened its position in the company.

In 2003, the president of Two Seeds was reassigned to Cai Dabiao.

The two verbal agreement, five years for a change, take turns "sitting", in fact, we all know that Cai is saying "good faith lies". The following year, double seed company out of Dongguan, into Guangzhou and Shenzhen store. After an unfavorable start, the use of "real Kung Fu" new brand to replace the "double seed", in order to open the first-tier city market. In the following years, "Zenkungfu" attacked first-tier cities across the country and quickly rose to become a first-tier brand of Chinese fast-food chain. In the public eye, Cai Dabiao was also among the famous entrepreneurs because of the success of the brand, and was regarded as the real spokesman of ZKF.

This made Pan Yuhai's fragile little heart was greatly hurt, Pan Yuhai thought: I am now not steamed buns, but I must compete!

What makes Pan Yuhai feel most dissatisfied is that Cai Dabiao's relatives have gradually taken control of Zhenkongfu's "important departments": his younger brother Cai Liangbiao monopolized the supply of computers to Zhenkongfu, his elder sister Cai Chunmei took control of Zhenkongfu's purchasing business, his elder brother-in-law Li Yuyi monopolized the repair and kitchenware business of the nation's stores, and his youngest sister-in-law Wang Zhibin monopolized the poultry business of Zhenkongfu, which is the biggest problem in the world. monopolized the supply of poultry to Zhen Gongfu.

The imbalance of power between the two sides has led to a growing suspicion between the former partners. The subsequent dissolution of the marriage between Cai Dabiao and Pan Minfeng made the relationship between Cai and Pan even worse.

In 2006, Cai Dabiao and his wife, Pan Minfeng, agreed to divorce. The two on the property and custody arrangements are: Pan Minfeng held 25% of the company's equity transferred to Cai Dabiao all the other houses, cash and a pair of children's custody to Pan Minfeng. After the division of property, Cai Dabiao obtained the same percentage of equity as Pan Yuhai. Pan Minfeng because of the "maternal" light, to ask for custody, gave up the enterprise's equity, which seems to be so great, but it is because of this great, resulting in the final "tragedy". Dad and mom's family power struggle, and finally dad went to jail. If the child grows up to know the truth, the child will be how much harm, and all this could have been avoided.

Starting in 2007, Cai Dabiao began to prepare for the listing. On the one hand, from KFC, McDonald's and other fast-food chains to introduce a number of executives, this move to make the real Kung Fu early start-up of some of the elders have left, which is also interpreted by the outside world as a "de-Panhua" strategy; on the other hand, Cai Dabiao in the same year to introduce the today's capital and Zhongshan linkage of the two venture capitalists. Zenkungfu's shareholding structure became Cai Dabiao, Pan Yuhai accounted for 41.74%, double seed company accounted for 10.52% (of which Cai, Pan accounted for 5.26%), today's capital and Zhongshan linkage accounted for 3% each. Later, Cai Dabiao through the holding of Zhongshan Linkage, the proportion of equity counterparts exceeded Pan Yuhai.

In 2008, Cai Dabiao did not fulfill the "verbal" commitment of five years ago to let Pan Yuhai as president, Pan Yuhai wanted to participate in the management of Zhenkongfu and could not, resulting in the contradiction between the two men and the fight became public.

And in the eyes of his ex-wife, Pan Minfeng, Cai Dabiao has gradually become a predator of the Pan family property. She told the media that Cai Dabiao had cheated her out of 25% of the equity in the divorce settlement on the grounds of "for the sake of Zhenkongfu and for the sake of the children", and that she wanted to get it back. According to Pan Yuhai, sister Pan Minfeng "bullied or get unfair treatment, I will go to help her get a justice".

Cai and Pan's two families thus plunged into a protracted family infighting.

And time is fixed in 2014, Cai Dabiao was sentenced to 14 years in prison. He is a wife and a son, and he is behind bars.

We look back, if the initial "Pan, Cai" husband and wife hold a 51% stake, the three signed a clear control of the "concerted action agreement". That now Cai Dabiao, is not enjoying career success, family warmth, friends and relatives to bring respect? However, the truth is that we don't have a "moonlight box", and we can't go back to the past by shouting "Borobolu honey". What we can do is to pay attention to the distribution of equity from now on, and make the relevant agreements and contracts clear and specific, so that the enterprise will develop in a healthy direction, and will not appear again similar to the tragedy of Zhenkongfu due to equity.

▌ ▌ 大状批注：

From the Chinese traditional concepts, "the poor know not to forget, chaff wife does not go down the hall". Turning back the clock, if we assume that the entrepreneurial couple of Zenkungfu did not get divorced, would it be necessary for the shareholders of Zenkungfu to meet each other in arms? This is really unknowable. On the one hand, we don't know the personalities of the several parties involved; on the other hand, we don't know what key events took place. But all in all, the startup ended up in jail, something no entrepreneur ever expects.

The easiest way to face a power grab within a business is actually to use criminal means. This is a hard problem for Chinese entrepreneurs, because Chinese companies have a relatively single means of avoiding taxes, so there are always some flaws that will be criticized. This is also the reason why many traditional entrepreneurs are reluctant to go public, after going public to face a variety of compliance is difficult for entrepreneurs to adapt. This seems to be a joke, but it is very consistent with the current situation in China. So we usually take the entrepreneurial, financing, listing route of the enterprise and traditional enterprises to distinguish between, because the two management of the enterprise thinking is different, we have their own way of living, but also each have their own wonderful.

The reason why the power grab by Zhenkongfu happened was because the two giants were not on par with each other, and when one shareholder wanted to take control of the enterprise, it was met with a desperate counterattack by the other shareholder. There were many ways to avoid this, such as signing a concerted action agreement, or setting up a slightly skewed shareholding, or setting up an exit mechanism that would have allowed one shareholder to exit and give a large number of options. All of these would actually be win-win situations. But business management is involved in the emotional factor, things have changed a lot more complex, not a sentence or two can be commented on.

2, the concert party agreement knowledge

(1) the signing of the concert party agreement can be agreed on both minority shareholders to obey the majority shareholder, but also can be agreed on the majority shareholder to obey the minority shareholder.

(2) The concert party agreement can agree to some of the matters consistent, only for some things signed.

(3) Unlisted companies do not need to disclose when a concert party agreement is signed.