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Sorry to hear of your situation. I'd be concerned about the company flipping its assets into a newco and wiping the slate clean - difficult with a pre-existing investor, but theoretically possible. I'd also review the shareholders agreements regarding drag along / tag along rights - they could be used for not so favorable purposes.

They won't really like it, but it's doable. Is it what you really want, though? An equity stake is only good if the company (i) is sold, (ii) goes public, or (iii) declares a dividend. If none of those happens, you're holding stock that you'll have a really tough time selling. Why aren't you asking for a royalty?

Companies and especially startups issue new stock all the time. Add a co-founder? Issue 1,000,000 new shares. Hire an employee? Give them 20,000 stock options (that will eventually turn into stock). Each time the company creates new shares, whatever number of shares you own gets diluted, because as a percentage, you own less of the total. Sometimes, ...

The way to protect minority (or any) stockholders against dilution is with a written non-dilution agreement. Basically such an agreement could state: 1) Existing stockholders have a right of first refusal to purchase any additional shares being offered by the company. or 2) A prohibition on the issuance of new shares without the prior consent of a super ...

on AIMs Under Rule 26 companies are required to provide certain information which is to be publicly available and up-to-date. which includes all the info that is written into the company policies about dilutions and consolidations and who has the overall say in what can and cant be done with the company, so this info should be readily available for you to ...

Please see Joel's excellent answer here: Forming a new software startup, how do I allocate ownership fairly? I don't see why anybody should get anti-dilution in your case. The few times I see it, it's usually when the company is started using university IP, and the university gets a small undiluted stake (2% - 5%) as partial consideration for the IP. ...

The issue I see here is a tax issue. You need to get your equity ownership formalized asap so that you are paying (either in cash, or in contribution of intellectual property) exactly what the shares are worth. If you pay less than the value of the shares that you get, you might have to pay tax on the difference. If you all have equal ownership, and one ...

Whether it's equity or debt is an issue to resolve among the founders. The basic issue is this: if the company decides to fold, does the investing founder get paid his $100K back first before any of the other founders see anything? If so, then it's debt. If not, then it's equity. I think most companies would do that deal as stock. ASsuming you're ...

Derek - I'd think twice (no three times) before agreeing to any anti-dilution clauses. Beyond making your org non-fundable to angels / vc's, everyone else takes a penalty dilution hit. Here's an interesting discussion to review.

Here's a simpler way to think about it: you have an option pool, that is a small fraction of the total number of shares in the company. Say, 10%, which could be 100,000 shares. With those 100K shares, you need to offer options to your next 100+ employees. You do the math. As time progresses, employee number 500 is less critical than employee number 10. It's ...

Hard to tell without more context, but this is probably referring to a right to participate, pro rata, in future financing round. The idea is that if you buy 20% of the company in a Series A, then you also have the right to buy 20% of the Series B, and so on. This provision is usually contained in an investor's rights agreement that you and the company ...

First, read this: http://www.investopedia.com/terms/d/dilution.asp#axzz1Yj4pchYC Dilution can can happen from employee stock option exercise, by offering additional shares into the market (to raise money trough an equity issuance), as well as other ways (convertible debt, etc.).

I've looked through several sites with regards to dilution and the issue is that the company can actually dilute the value of your stock by issuing additional shares. And they don't need the courts to do it. There are several resources that describe how this is done Wikipedia, Foolish Fundamentals, etc. Basically the situation becomes the following if the ...

Let's pretend that this was a corporation with, say, 100,000 shares. Your idea is that each of the four founders gets 5,000 shares each, and the other 80,000 shares will be used for investors, to compensate employees and so on. Implied in that is that the founders won't go below 5% each. (Unless the company amends its certificate of incorporation to ...

All but the smallest VCs will reserve extra money for future rounds for this company when they make the A-round investment. Usually the series A terms gives the series A investors the right to buy shares in future rounds, and if things are going well, that's exactly what the money they reserved will be used for. This reduces their dilution in subsequent ...

Angels invest in a company HOPING they will be diluted. If their shares are diluted, it means the business is growing. If new investors, such as VC firms come in, then the angels percentage of the shares is smaller, but the valuation of the company increases so the angel's shares are worth more each. It is not such good news for angels if there are no new ...

This depends entirely on the company's articles of incorporation and the various contracts: a. Are new shares issued, or does the angel get existing stock? 25% of what? What has been agreed with the investor? b. What does the contract with B say? c. What does the contract with B say? More on (a). Suppose there are 1000 shares authorized in the company, ...