Establishing a Trusts to simplify my shareholding structure

[julienlab]

Hi,

I am living in Singapore and have a start up here. I have got about 10 friends who are also shareholders, all of us having the same ordinary shares.

There is a program supported by government money that requires that the Founders retain at 51% of the voting rights to get joint funding from a VC and the government. The problem is that it is also required from those with the "Founder" status to have personal liability and indemnification in case of misrepresentation of facts and so on...which makes it too risky for some of my shareholders who have more to lose than myself, the clause being broadly written...

The bottom line is that I can't get enough Founders together to reach 51% post investment.

The new VC considering to invest in my business together with the government told me that establishing a Trust with my friends could solve this. It seems that the plan would be for them to transfer the ownership of their shares to me and that we would have a "secret" agreement that rules the sharing of proceeds/dividends. In other words, on the official records I would be the only one holding shares while we would be many to share the benefits.

I am a bit concerned about a few things :
- my liability towards my friends in case I screw up the business...
- their guaranteed rights to a fair retribution (sale of assets and or dividends)
- their guaranteed rights to non-dillution

So the question is: is establishing a Trust is the way to go regarding my objective ? What are the main things to keep in mind ? any alternative way you could think of?

Thank you so much in advance.

best regards,

julien

 

[TheGeekess]

Hi,

I am living in Singapore and have a start up here. I have got about 10 friends who are also shareholders, all of us having the same ordinary shares.

There is a program supported by government money that requires that the Founders retain at 51% of the voting rights to get joint funding from a VC and the government. The problem is that it is also required from those with the "Founder" status to have personal liability and indemnification in case of misrepresentation of facts and so on...which makes it too risky for some of my shareholders who have more to lose than myself, the clause being broadly written...

The bottom line is that I can't get enough Founders together to reach 51% post investment.

The new VC considering to invest in my business together with the government told me that establishing a Trust with my friends could solve this. It seems that the plan would be for them to transfer the ownership of their shares to me and that we would have a "secret" agreement that rules the sharing of proceeds/dividends. In other words, on the official records I would be the only one holding shares while we would be many to share the benefits.

I am a bit concerned about a few things :
- my liability towards my friends in case I screw up the business...
- their guaranteed rights to a fair retribution (sale of assets and or dividends)
- their guaranteed rights to non-dillution

So the question is: is establishing a Trust is the way to go regarding my objective ? What are the main things to keep in mind ? any alternative way you could think of?

Thank you so much in advance.

best regards,

julien

US Law ONLY.

 

[OHRoadwarrior]

When you do it in the US, come back for advice.

 

[tranquility]

I agree with the others, this requires more facts.

And, as to US location, give us a sign. Good luck with your complex situation.