Founded tracks the properties of your company's share classes to give you massive flexibility over shareholder powers and ownership of your company.
Share Class Name
The share class name is just a convenient way to identify each share class and differentiate it from others. It's most common for share classes to be named alphabetically (A, B, C ...). It's also possible to not name the share class. If no name is given, the share class will be identified in the future solely by its type (for example, Common Shares).
Share Class Type
The type is a high-level description of the powers and properties of the share class. The company's standard shares are called "Common". But more complex share classes can be called Preferred, Special, or anything that seems appropriate.
Priority rights determine who will get possession of the company's property and assets in the event the company stops operating business. This is particularly important for shareholders that have paid significant sums for their shares and want to ensure they at least recover their funds if the business is not successful.
When creating share classes on Founded, Common Shares are all given equal priority rights. Other share classes, like Preferred Shares can be given priority over the Common Shares, or first priority over all share classes. Keep in mind that this priority only applies until the shareholder has received a sum equivalent to what was originally paid for their shares. After that amount has been re-paid, any remaining property or assets will be paid to the holders of Common Shares.
Series of Shares
It is possible to divide a share class into several series. Each series of shares can then have its own unique properties, like voting rights, while also having the overall properties of the share class. Structuring a company in series is an alternative to using multiple share classes, which is sometimes preferred by lawyers and accountants.
Voting or Non-Voting Shares
Voting rights are some of the most important properties of a share class, as they determine how much control shareholders can exercise over the company. Typically, any shareholder who will be actively involved in controlling the company will want to have voting shares. Non-voting shares are suited to passive investors, silent partners, and employees with a small stake in the company.
There are some issues, like fundamental changes to the company's business, that will allow all shareholders to vote, including the non-voting shareholders.
Votes Per Share
Most voting shares grant the shareholder one vote per voting share. This keeps things simple and makes it very easy for the company to count when any issue goes to a vote.
In some cases, companies grant extra voting rights to certain shareholders. For example, the company's founders might insist on having additional voting rights so they can control the company. In that case they could hold 100 votes per share, so they would be able to significantly out-vote future voting shareholders.
Number of Shares
Usually, companies are structured so each share class has an unlimited number of potential shares. This maximizes the flexibility of the company in the future, as the company's founders might not know what will happen as they grow.
That said, there are instances where the number of shares per class can be capped at a maximum number. For example, if the founders are certain they will never issue new shares or change the ownership structure, perhaps a maximum of 100 shares will make it easier to manage and understand the share structure.
Nevertheless, unless there is a specific reason to limit the number of shares, most companies will choose to have unlimited shares within each share class.
Dividends are payments from the company to the shareholders. Each dividend must be paid on a class of shares. Typically, each share class has a discretionary right to receive dividends. This way, dividends can be paid to all shareholders of a certain class whenever the directors or shareholders decide to make that payment.
If a certain class of shareholders will never receive dividends, the share class properties can specifically state that they will have no right to a dividend. However, a discretionary dividend right gives the company more flexibility in the future without creating an obligation to ever pay dividends.
Redeemable Shares can be purchased by the company at any time. This means the directors can cause the company to buy Redeemable Shares from a shareholder, whether or not the shareholder wants to sell. The price for the Redeemable Shares will be determined in advance as either the Subscription Price (what the shareholder originally paid when the shares were issued), Fair Market Value (whatever the shares are worth at the time of redemption), or a pre-determined amount. This price will not change, even if the Redeemable Shares are worth much more at the time the company decides to purchase them.
Retractable Shares are similar to Redeemable Shares (described above), except Retractable Shares are purchased by the company whenever the shareholder decides to sell them. This allows the holder of Retractable Shares to require the Corporation to buy back the shares, whether or not the Corporation wishes to buy the Retractable Shares. The price paid by the Corporation can be either the Subscription Price (what the shareholder originally paid when the shares were issued), Fair Market Value (whatever the shares are worth at the time of retraction), or a pre-determined amount. This ensures the holder of Preferred Shares will not lose the initial amount paid for the shares.
Use Redeemable Shares with Caution: While Founded lets you have a huge range of flexibility over your company's ownership, it's important to fully understand the consequences of using Redeemable and Retractable Shares. Always consult an expert, like a lawyer or an accountant, when you don't fully understand these implications.