Voting Trusts: Think Ahead

In the early stages of a startup, founders often issue equity to friends, family members and other investors to acquire initial working capital and to engage key employees at a low-cost basis.

When issuing equity in the early stages of a startup, it is important for founders to consider issues that will affect future stages of their startup's business, including future financial needs. Obtaining the approval of minority shareholders for a financing or reorganization of a startup can prove challenging.

A voting trust is a method of ensuring a certain amount of control over the voting rights attached to certain shares. In this post, we discusses why some startups might benefit from having a voting trust in place among some of its shareholders.