My father and brother 2 years ago founded a company and now wanna move it abroad to western Europe. They told me they want to register me as a 15% shareholder, but I won’t have any decision-making rights or defined role for now.
They said I might get more involvement later if I prove value and/or when my dad retires. I haven’t seen the contract yet.
I’m fairly new to business and just trying to understand if this is common or not in family setups. Thanks!
My family want to give me 15% of their company but no role or decision making. Is this normal?
byu/Dazzling-Ad9979 inEntrepreneur
Posted by Dazzling-Ad9979
7 Comments
It’s not uncommon for families to give ownership to other family members.
Get the contract and take it to your own independent lawyer.
If they are giving something to you for free, then what can you say?
But you need to be aware of your responsibilities and liabilities as an owner.
Yes, it’s common for both family businesses and also for key non-family employees.
You get a share of any dividends paid, and if the business were to sell you’d get a chunk of cash commensurate with your share of ownership.
It also might tie you into employment if there is a connection made between your ownership and working in the business. (ie. If you quit, you lose your share).
It doesn’t really matter whats “normal” in business, it’s more about what the contract states and how the parties behave.
You never mentioned your age or circumstance, so they very well could just want you to benefit from the business’s future success. There could be a big time sell-out later that you’d potentially receive 15% of, and you’d potentially be receiving divident payouts along the way.
There are also rsisks. If they conduct fraud or break the law, you are likely to get pulled into that. They could issue new shares to themselves, diluting your 15%. They could decide to not pay out dividends at all, or handle assetts in a way that benefits themselves but not you.
At the end of the day, you need to talk to an attorney in your area that explain what your legal protections are, and help you evaluate if the agreement seems to be in good faith.
I think it’s rare, but not that uncommon.
It could be a legal requirement in that country to have three people for a business. Or they could be doing it so you can take it over if something happens to them.
They could also be trying to slowly pull you into the business and try to guilt you into working full time for a very small share. Or maybe they just need somebody to act as a tie breaker.
You can part owner of a business and not have a defined role or any role for the matter.
Yes this is normal.
Another example, you buy a single stock of a company. You are now part owner this business. You don’t deal with day-today operations and you may or may not have voting rights. But you are still part owner.
The classification for you would be “non materially involved”. It can change what you may be paid. Check out the contract and articles of incorporation. Also check for debt, you’d now be on the hook for 15% of that.
I am curious if this shifts any risk onto you, or if it’s like someone who buys stocks that doesn’t take on company liabilities??
Either way they are doing what they can to include you. Own some responsibility and go make yourself valuable. You don’t need authority. You were just gifted a big foot in the door for being born. 15% is no small thing