As
I promised, here is a memo explaining what will happen when Elkhound Oil goes
public next month:
There will be 10 million common shares available.
(Common shares are basically regular shares.) We expect that the price for
each share will be somewhere between $10 and $15.
The shares have been
divided into Class A and Class B shares. When there is a vote on a company
matter, Class B shares carry 10 times more voting weight. For example, 100
Class B shares are worth 1,000 votes, while 100 Class A shares are worth 100
votes.
Only employers and employees can buy Class B shares. In addition,
each employee is only allowed to purchase a maximum of 100 Class B shares.
Since Class B shares are worth more in voting rights, and since employees
can only buy a limited number, this means that the original five owners (including
yourself) will keep control of the company.
I have included an option
for the company to offer preferred shares sometime in the future. Preferred
shares are different from common shares. Preferred shares do not have any
voting rights. However, when your firm is in a position to pay dividends,
the people who own preferred shares are always paid first.
Dividends
are just a cash amount paid out to shareholders when the firm has a profit.
This is a great way for your company to get cash from people who want a safe
investment but have no interest in telling you how to run the company.
Given
the successful year Elkhound Oil has had so far, I expect that you may be
able to offer preferred shares by the end of this year. I think it's quite
reasonable to hope that you will be paying dividends to people holding preferred
shares by the end of next year.
Please call me if you have any questions.
Yours,
Michael
Wilkins
Corporate lawyers need to be able to communicate
complex issues in a way that their clients, and occasionally juries, can understand.
"Communication skills are everything," says corporate lawyer Rick Wilson.
"What we're about is what we say and what we write."