We have a company with 3 shareholders (1/3 of shares each).
We are now restructuring and the distribution will be 45%, 45%, 10%.
I and the investor will go from 33.3% to 45% while the third shareholder will go from 33.3% to 10%.
But, during that time, the investor is also requiring some changes:
- XXX Ltd will continue to fund the company thanks to the shareholder loan provided by XXX Ltd which can be converted any time in shares of [the company] based on a valuation of €YY (enterprise value)
- Amendment of the Article of Association (3)(b) in order to reduce the threshold for extraordinary resolutions from 90% in nominal value of the total shares to 64%
Which makes me think of two issues:
- It looks that: if at any time the investor can convert the shareholder loan into shares, he would have the ability to dilute both me and the 10% shareholder below 64% and take total control.
- Also, the investor's contribution is capital, while ours is unpaid time. So if he has a mechanism to convert his investment while ours is simply sunk in the company, it seems like there is a strong imbalance.
Am I interpreting this correctly?