The most likely type of share offered on Equivesto is a Non-Voting Common share.  Let’s break down what that means:

Shares

Shares refers to the equity investment.  This means you are a shareholder; a partial owner of the company.  As a shareholder, you are bound by the rights and requirements outlined in the shareholder’s agreement.  Each company has a unique shareholders agreement, and when investing, you agree to its terms.  Take the time to review this document before investing.

Here are some of the things that you most likely will be entitled to as a shareholder:

Annual Shareholders Meeting

Each year, companies of all sizes are required to have a shareholders meeting

These meetings can be in person, but are often done virtually.  During the meeting, the company will often discuss the previously years financial results, goals for the coming year, any changes to management (the board of directors), and other topics.  Depending on the type of shares you have, you may or may not be entitled to vote on these issues.  See Non-voting below.

Annual Financial Statements

The corporation is required to provide you will financial statements each year.  Depending on the size of the company, these can be either Notice to Reader (the easiest and least comprehensive), Review Engagement, or Audited (the most detailed, and required for public companies).  

Review the shareholders agreement of each company to learn of any other entitlements and rights you have as a shareholder.

Common

The most common types of shares are common and preferred.  Common shares are the basic version of shares.  They usually do not have any special provisions, and are the type of shares most often owned by the founders of the business.  Common shares are most likely the type of shares you would buy if you were investing on the stock market. 

Preferred shares and special restricted shares.  These often have no voting rights, but are guaranteed a dividend.  Preferred shares can complicate scenarios, so most companies on Equivesto issue common shares to keep the entire process simpler for the investors and the company itself.  

Non Voting

Non voting means that the shares do not have any voting rights associated with them.  Traditionally, common shareholders vote during shareholders meetings to appoint and confirm the Board of Directors.  The Board of Directors are the representatives of the shareholders who oversee the company.  They are responsible for hiring the CEO and determining the long term direction and vision of the company.  With small companies, the board of directors is usually quite small, and is made up of the core founding members.  As these individuals are also usually the largest shareholders, they are on the board to lead the company they founded and ensure it follows their vision.  Equity crowdfunding and the addition of potentially thousands of new shareholders can complicate things for a small company that initial had only a few shareholders.

To keep matters simpler for both founders and small crowdfunding investors, most companies issue non-voting shares when raising on Equivesto.  This gives the initial founders comfort that they remain in control of the company they created, and this keeps investing simpler for smaller investors, who don’t need to be wrapped up in complicated corporate governance requirements. Soliciting investor votes or proxies can also be an expensive process when small shareholders often ignore shareholders meetings and votes anyway.

Some companies issue voting shares to new investors but create multiple voting shares for the controlling group.  This means that individual investors do have a vote, but they can be outvoted by the controlling shareholders voting together.  In the case of a dispute within the controlling group, the single vote shareholders may decide the issue. 

Furthermore, while each offer is unique, it is rare for companies to offer more than 50% of their shares as part of an investment campaign on Equivesto.  As a result, control of the company already remains with the original investors, who, even in a scenario with voting shares, have enough power to decide the direction of the company regardless. 

While this does keep things simpler for everyone involved, there is added risk for investors who now no longer have a say or vote regarding how the company is run. While there are legal means, called “oppression remedies” to use civil courts to prevent Boards and majority shareholders from unfairly disregarding the interests of common shareholders, these are expensive and time-consuming and are therefore of little use to shareholders in companies at the stage of initially raising capital through equity crowdfunding.

Shareholder Protections

Tag Along and Drag Along Rights

Any company raising on Equivesto is required to have ‘Tag Along’ and ‘Drag Along’ Rights in their shareholders’ agreement.  These rights protect small shareholders in the event of a potential sale of the company.  They stop majority shareholders from simply selling just their shares and leaving the minority shareholders in the company.  These rights also allow the majority shareholders to force the sale of the minority shareholders’ shares if the entire company is being bought.  

These rights are important to ensure that small shareholders (like those investing through equity crowdfunding) cannot be easily taken advantage of. Make sure to read the offering document of each company to understand the rights of the shares before you invest.