I work for a small Limited company in the UK that's owned 100% by the MD. I'm one of the management team so have some influence over the direction of the company, but no directorship or ownership stake yet.
I've been offered the opportunity to buy a 1% of the shares in the company. They would not be ordinary shares - they'd be a class of shares where the value would only be realised when the company is sold (which is the plan within the next 10 years).
Aside from whether the amount they want for 1% is reasonable (which I believe it is), I'm after some advice on this. I am already aware of some of the risks of this:
- The company could go bust of course and I'd lose it all.
- If I want to leave the company I may only get my original investment back - or possibly less if the company has devalued (which the owner could do deliberately if he wanted to!).
- The owner may decide not to sell, leaving my investment stuck in there indefinitely.
- The owner could decide to dilute the shares by issuing a large number of shares to himself, diluting my shareholding to <1%.
So what I'm after is some advice on the risks and what can generally be done to mitigate them if anything (especially the share dilution as this is most out of my control) - I assume via a shareholders' agreement or similar. Assume that I want to find a way to make it work rather than find reasons not to invest. I asked some of these questions a while ago to a solicitor who seemed to indicate that he'd review and firm up a shareholders' agreement for about £2-3,000 which is way over what makes sense in this context.
So, what do you advise?
(Posting anonymously for privacy reasons but I'll keep an eye on the thread)