Several ways of partner equity exit mechanism

Several ways of partner equity exit mechanism

1. Appoint the exit mechanism in advance and manage the partners' expectations.

Set up the equity exit mechanism in advance, and agree on the equity and return form to be returned after the partner withdraws from the company at what stage. The equity value of a startup company is that the long-term service of all partners is earned by the company. When the partner withdraws from the company, the equity held by the partner should be withdrawn in a certain form. On the one hand, it is more fair to other partners who continue to work in the company, and on the other hand, it is convenient for the company to continue to develop steadily.

The acquisition of equity by partners is based on the long-term optimistic view of the company's development prospects and the willingness to participate in the venture for a long time; the small amount of funds that the partners put together in the early stage is not the real price of the large amount of shares held by the partners. The main price of the equity is that all partners are bound to the company for a long time (for example, 4 years), and the long-term service company is used to earn equity; if the exit mechanism is not set, the partner who withdraws from the middle is allowed to take away the equity, and the partnership is withdrawn. People's fairness, but it is the biggest unfairness to other partners who have long participated in entrepreneurship, and they have no sense of security for other partners.

2. Shareholders withdraw midway and share premium repurchase.

The withdrawal of the partner's share repurchase method can only be stipulated by the advance agreement. When exiting, the company can repurchase the equity of the partner according to the valuation of the company at that time. The price of the repurchase can be appropriately determined according to the price of the company at that time. Premium.

3. Set high liquidated damages clauses.

In order to prevent partners from withdrawing from the company but disagreeing with the company's share repurchase, a high amount of liquidated damages clause can be set in the shareholder agreement.

Specific game rules landing method:

1. Within a certain period of time (for example, within one year), the agreed equity is held by the founding shareholder;

2. The equity of the partner is agreed to be linked to the service period, and the equity is matured (for example, 4 years);

3. The shareholder withdraws midway, and the company or other partners have the right to repurchase the immature or even mature equity of the departing partner;

4. For the act of not paying off the equity when leaving the company, in order to avoid the uncertainty of judicial execution, it is stipulated that the breach of office will not refund the high amount of liquidated damages.

Three common case studies:

1. The startup team resigned. We have a client who was mainly a university student and started a business together. One shareholder took a 15% stake. He has to leave after more than a year. The problem of how to deal with equity after leaving the company became a problem for other founders, and the founder who left the company strongly disagreed with the equity. Although through hard negotiations, the founder finally got the stock back and returned it to the company at a very high price.

In the face of this problem, we suggest that if the company is in the initial stage, you may encounter another situation, you can register another company, we use another company to do this business. At this time, the founder holding the 15% stake in the company actually has no value. This solution is ideal for those hegemonic founders who are unwilling to accept reconciliation and negotiation.

However, we believe that in order to maintain the healthy growth of both parties and the startup, we should arrange for exit arrangements at the initial stage, such as what price to buy back and so on.

(Comment: In fact, there are still some ways to deal with the company's lockout and depreciation, forcing the resignation founders to rush to get rid of it. This is very common. In fact, there are ways to introduce external investment to dilute the equity of a founder. .)

2. Marriage system. Now Beijing and Shanghai seem to have a higher divorce rate. It may be at a certain stage with the entrepreneurs. I don't have this data. I guess this number is still relatively high. Friends who used to be a business may have paid attention to it. Before Tudou, there was a potato clause. The background of this incident is that the founder of Tudou.com has been a potato company, and there are investors coming in. In fact, he applied for listing in the US earlier than Youku, but on the spotlight of the listing, his wife proposed to divorce and divide the property. At this time, the risk of the company has suddenly increased. For investors in the US market, the controlling shareholder of the company loses control because of divorce. This is a very big change and risk. The result is that Youku, which submitted the application later, went public first, and this one-to-one change directly changed the fate of the two video websites in China. Finally, I saw that the founder of Tudou.com gave $7 million. Finally, the mediation between the two sides solved this problem. Everyone knows how much this cost is, time cost, company development opportunity cost, and actual monetary compensation cost. This involves the issue of shareholding marital problems, but it also involves some equity exit mechanisms. In principle, the "Marriage Law" of our country means that as long as the property during the period of the husband-and-wife relationship is a common property, the husband and wife are joint property during the business period, including the company's equity. In principle, it is a common property, but the two parties may agree on this property separately, and may not deal with it according to the common property. As long as one party voluntarily, the two parties sign the agreement. So there have been potato terms that everyone said, and many investors are also worried that the equity changes will have a big impact on the company. Some of the friends who are doing business personally have these concerns. Everyone will sign a document involving the company's equity and sign a document between the spouses. This equity does not belong to the joint property of both parties. Equity has a relatively large impact on this aspect. If the spouses do not claim the rights between the shares, they can give you some compensation, which can be operated.

3. The shareholders passed away. We have also faced an example. The company has just been set up and sent us an email saying that a shareholder has died because of an accident. Everyone can imagine, if it dies, what impact will the company's equity have? If one of the shareholders has passed away, if there is no system design, everyone will follow the Chinese Inheritance Law. The "Inheritance Law" means that after the person hangs up, half of the property during the marriage of the couple is a spouse, which is equivalent to a shareholder coming in, like a startup that has added a shareholder. After the spouse was finished, the first heir, including his father, mother, son, and daughter, were equally divided. This is part of the shareholder's arrival.

(Comment: Many people don't understand why investors and management teams are afraid of too many shareholders in their own companies. Because our laws give shareholders a lot of rights protection, this is a good thing, but when it comes to the handling of major events of the company, It is often because of too many shareholders that the company's internal coordination costs remain high. For example, if you increase capital and expand shares, if you do not achieve control, you must lobby and organize, and achieve two-thirds control to complete the capital increase. The resolution, in addition, because the shareholders of the limited liability company have the right of first refusal, so if you want to increase capital and expand the shares, you must let each shareholder sign a waiver of the pre-emptive rights agreement to ensure that new investors can successfully acquire equity. One step is the result of negotiation. There are games and the transaction cost may not be low.) So the result is that if there is no system design, the problem will be that, for example, the core of the core is three people. They are all consistent, and many things are also discussed. Suddenly after a shareholder unexpected trend, there was a bunch of shareholders who held shares in the company. In the future, we will face problems. If the equity system is not designed, we will face these problems. For this, our "Company Law" stipulates that if everyone clearly stipulates in the company's articles of association, if the death of one party is later, and others do not inherit according to the inheritance law, the laws of our country are allowed. After the trend, this equity does not inherit, and everyone can give his spouse and heirs a certain amount of cash compensation. For example, according to the actual valuation of the company at the time, or a certain premium compensation for the net profit of the year, the spouse or heir of this shareholder should be dealt with.