Legal Question in Business Law in Massachusetts

Q corp wants to raise more capital to expand its business, but already has issued all authorized shares.

What does Q corp need to do to raise more capital in the equity markets? if the current shareholders do not wnt to dilute their control over the company, what could they do to raise capital? What could have been done to safeguard shareholder control at the time of incorporation?

Asked on 11/21/10, 5:13 pm

2 Answers from Attorneys

There are a number of approaches such as issuing preferred stock with a redemption right to the company or issuing a convertible debenture, a loan that if not paid off in a certain period of time is convertible into shares of the company.

All this depends on the amount you want to raise and what assets or alternatives may be available as a basis for obtaining additional capital. Please feel free to contact me to discuss your options.

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Answered on 11/26/10, 5:22 pm
Kevin B. Murphy Franchise Foundations, APC

As a franchise attorney I can only add there is another option. The corporation can increase the number of authorized shares. Depending on what the bylaws say, this could require authorization of the shareholders or board of directors, or both. Shareholders do not normally have a right to an undiluted stock interest. Consult with a good business or franchise attorney in your area for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Attorney

Franchise Foundations APC

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Answered on 11/27/10, 9:53 am

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