Drafting Subsidiary Corporate Charters for Executive Founder Visas
Drafting subsidiary corporate charters for executive founder visas requires securing foreign parent voting majority while defining unassailable executive authority in bylaws.
Dual-Class Stock
Meaning
Equity structures that utilize two or more categories of shares allow for the separation of economic interest from voting control. This dual-class stock gives certain founders or early investors superior voting rights compared to the general public. While the financial dividends may be identical across all units, the power to elect directors remains concentrated.
Control Power
High vote shares usually carry ten votes each while the standard shares carry only one. Implementation of dual-class stock protects the long term vision of the leadership from the pressure of short term market fluctuations. This arrangement is common in technology firms where the founders wish to retain management authority after an initial public offering.
Investor Risk
Passive shareholders often face a permanent minority position where they cannot influence the composition of the board. Holding dual-class stock means that the price of the common shares might trade at a discount because of the lack of governance influence. Disclosure of these risks is mandatory in the prospectus to inform potential buyers of the limited oversight they will possess.
Sunset Provision
Automatic conversion into a single class often occurs after a set number of years or upon the death of the founders. A dual-class stock structure eventually dissolves to ensure that the voting power aligns with the economic risk over time. Reversion to a standard one share one vote model satisfies the requirements of many institutional indices.