> so is it an Australia specialty or only common in Australia? the origins of the no-liability in UK was payment of share capital in installments, making it within reach of smaller investors ... keep in mind that in 18th century, people in Cornwall (origins of no-obligation) usually contributed mining equipment or supplies, rather than liquid cash. As of now, to my knowledge partly paid up shares is available in every global jurisdiction though there may be policy issues (thin capitalisation rules) or special constraints ... eg I know in Malaysia to get certain types of business licenses the share capital has to be fully paid up.
> Who makes the call. for partly paid up, usually the directors (it seems to me a share rights issue is more fair for everyone rather than just a subset of investors) or via pre-agreed triggers when firm needs more capital. An option on the other hand is usually exerciseable by the investor. > employee has 'unpaid share', employees usually have the shares/options or not (black or white) but there can be a vesting schedule which restricts the participation. If you are doing a salary sacrifice, does it make sense for the company to "claw-back" some of the sweat equity via issuing partly paid shares? I think employees would resist this. as for issue of director liability ... there is also the fudiciary duty to shareholders but note that SOX is particularly onerous and with shareholder activism, US carries a degree of risk. Note that for private companies (eg limited to say<50 shareholders) or rules for small scale offerings, the members agreement as well as director liability insurance could address most of the concerns of startup investors not to mention the standard protective measures (preferred etc). I still find it hard to match the capital structure of a typical software startup with that of a capital-intensive exploration & production company, for example if getting paid in installments, whilst it may improve the NPV of investors, it adds to the uncertainty of founders that there's a chance the followup funding might not come through. Lawrence http://www.linkedin.com/in/drllau On Sunday, 8 March 2015 11:07:16 UTC+8, Weiwu Zhang wrote: > > > On Sat, 7 Mar 2015, drllau wrote: > > > The origins of no-liability date back 150 years. The British Company Act > of > > 1862 limited liability of shareholders to that of unpaid amount, carried > > forward up to 1 year after the partly paid shares were sold (cf > insolvency > > recovery). No liability came about as a way to evade the cost-accounting > > regulations applied to utilities and escape solvency requirements for > banks. > > Limited liability only matured for mining companies late 19th century > and > > from memory, no liability rules were never intended for investor > protection. > > I pondered and meditated about this paragraph for 3 times. It struck me as > a > strange thing, that there is a 'unpaid share' concept in betwen solid paid > share and option for equity at all. To mend my ignorance of finance > knowledge I looked up wikipedia page†, which only cites the example in > Queensland, so is it an Australia specialty or only common in Australia? > > † http://en.wikipedia.org/wiki/Partly_paid > > So forgive me about naïve questions: > > Is the difference between unpaid share and option on these aspects? > > - Who makes the call. There are a few occassions a option can be used for > equity, but in case of 'unpaid share', it has to be paid when the > company > callup for it. > > - Risk of losing previous investment. If you don't use an option, you lose > no more than the option. If you don't answer the call, you lose your > previous investments al-together. > > - Who uses it. Options are often used to encourage employees, while if an > employee has 'unpaid share', he or she can easily lose all investments > if > the director calls for it at the moment of employee fincial difficulty, > while an investers have more outlets to pay the unpaid and protect > their > investments. Hence, using 'unpaid share' in place of options offer > some > advantage to the party who can get financial resource easily (i.e. > investors). > > Let me know if I understood correctly. There are financial newbies in the > forum and I speak for them too:) > > On the topic of startup - options are often used to -- -- You received this message because you are subscribed to the Silicon Beach Australia mailing list. Vist http://siliconbeachaustralia.org for more Forum rules 1) No lurkers! It is expected that you introduce yourself. 2) No jobs postings. You can use http://siliconbeachaustralia.org/jobs To post to this group, send email to silicon-beach-australia@googlegroups.com To unsubscribe from this group, send email to silicon-beach-australia+unsubscr...@googlegroups.com For more options, visit this group at http://groups.google.com/group/silicon-beach-australia?hl=en?hl=en --- You received this message because you are subscribed to the Google Groups "Silicon Beach Australia" group. To unsubscribe from this group and stop receiving emails from it, send an email to silicon-beach-australia+unsubscr...@googlegroups.com. For more options, visit https://groups.google.com/d/optout.
