Module 4 · Chapter 11

Control: the Board, Consent Matters and Information Rights

A minority investor cannot win a shareholder vote. Its control comes from a board seat, a quorum rule, a list of things the company must ask about, and a monthly flow of numbers.

≈ 14 min read 8-question test

In this chapter

  • Where a minority investor's control really comes from
  • How the consent list works, and why it is written twice
  • What the investors are sent, and their right to new shares first

11.1Investor control in one paragraph

After the Series A, Meridian held 30% of the shares on the register. That is not enough to pass any resolution on its own. Yet Solaris needed Meridian's agreement for twenty-two kinds of decision, and its board could not act in writing, or at a first meeting, without Meridian's director. That control came from the board, a quorum rule and a list, not from the percentage.

Key point

A fund does not want to run the companies it invests in. It wants to make sure the company cannot surprise it. The founders' worry is the mirror image: a company that must ask permission moves more slowly than one that simply decides.

Also in this chapter

  1. Why 30% of the shares is a veto, not control
  2. The board and the quorum veto
  3. The Investor Director works for the company
  4. The consent list and who must agree
  5. Asking for consent, and when silence counts
  6. Why the list is written twice
  7. What the investors are sent
  8. Late reports and the fund's own investors
  9. Pre-emption: first refusal on new shares
  10. The one thing the list missed
  11. Your job

Preview

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