I need to add a new co-founder in my Delaware C-Corp with significant shares > 10%. I am only director in the company right now. I am wondering what is the best way to do this. Do I need to or should I file any amendment to add director?
A Delaware corporation that adds a second shareholder (co-founder) can have the original founder remain as the sole director, or the co-founder can be added as a second director (presumably after the bylaws have been amended by the existing shareholder or the board and the second director has been elected accordingly).
What must be done to issue shares to the co-founder will depend, in part, on whether the corporation presently has enough authorize but unissued shares. (Please see "How Do We Issue Corporate Shares?" at https://danashultz.com/2014/06/10/how-do-we-issue-corporate-shares/.)
The fact that you have asked this question means that you cannot address this task properly on your own. You need to retain an experienced business lawyer to advise you.
This information does not constitute legal advice and does not establish an attorney-client relationship.
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How to issue shares? Tax and financing issues
To issue shares to the new shareholder, the Board should authorize the issuance, have the new shareholder execute a subscription and investment letter, and issue a stock certificate if the shares are certificated. You also should consider a shareholders' agreement to address issues such as deadlocks and exit strategies (such as a buy-sell provision). If there are insufficient authorized shares, you will need to amend the certificate of incorporation to increase the number of authorized shares. To add the new person as a director and officer may require an amendment to the By-Laws, and will require Board action to appoint the new director and officer. You should consult with an experienced Corporate Attorney to assist in those matters.
The foregoing discussion does not establish an attorney-client relationship, is qualified by the limited facts presented above, and should not be relied upon as legal advice. To obtain definitive legal advice upon which one can rely necessitates retaining an attorney who is qualified in this particular area of the law.
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