Bengaluru | 08 May, 2018 (1 year, 8 months ago)

Startup Funding and Finances

Do I have to invest money to have a equity holding in a private limited company?

I am planning to start a new pharmaceutical manufacturing firm along with the investor. The investor is going to provide all the financial support and I am going to be the brain behind the company. Do I have to invest money into purchasing the site or acquiring a bank loan to get 50% equity holding of the company?
Answers
10 May, 2018 | 13:22

The shares can be acquired by various mechanisms. Some of the preferred way are as following:
1.At the time of incorporation of your Company, to acquire shares, the promoter/founder must subscribe the number of shares at the face value which is normally @ INR 10/- each equity share.;
2. At a later stage, shares can be further issued via Employee Stock Option Plans, Bonus Shares, Sweat Equity etc.
In many of the scenario, the Founder/Promoters contribute minimum amount for their equity and investors are issued shares at a higher premium, so that even the equity share holding of investor and promoter are in equal proportion of 50:50, however, the monetary contribution of the investor is on higher side. Many of the time, to achieve the same, Promoters are also being issued shares with differential voting rights.
It is advisable to have a proper legal structuring for your project to enable you to protect your interest and needn’t have to contribute the equivalent amount as investor to maintain 50% of the equity share holding of the company.


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