"He who wins the hearts of the people wins the world, and he who loses control loses the country." This sentence sounds a bit heavy, but it is quietly playing out in the reality of entrepreneurs. Not all "kingdoms" are taken down by open swords and guns, and not all "loss of power" occurs in a shocking battle in the board of directors. Sometimes, a simple voting right delegation and an inconspicuous equity dilution quietly complete the "transfer relay" of controlling rights.
The story always starts with "we just got financing", but ends abruptly when "I found that the company doesn't listen to me anymore." And when the founder finally realized that he was no longer the controlling shareholder, everything had already settled.
This is not a novel plot. As a member of Goheal, we have seen too many "entrepreneurship stories" end with "power quietly falling by the wayside". Today, we will use a real adapted case to take you into the secret power game scene of "controlling rights transfer".
American Goheal M&A Group
1. "The shares are still in my name, but I am no longer the company's 'leading actor'"
Lao Chen is the founder of a new energy equipment company. As a technical person, he worked hard for five years and finally entered the industry's vision with a low-energy battery technology. Financing was a natural outcome. He was 43 years old that year and thought he was standing on the cusp of the storm.
The first round of financing came, with a valuation of 120 million yuan. A certain industrial fund wanted to invest 30 million yuan, accounting for 25% of the shares. Lao Chen readily agreed, thinking that "with capital coming, things will be easier."
But soon after the contract was signed, the investor suggested setting up a "joint board mechanism" and proposed that certain major matters in the future should be "passed by special voting rights." Lao Chen didn't look closely and thought that "it's normal for shareholders to discuss it," so he signed it.
The next year, the company's business soared, and the B round of financing was imminent. The investor proposed to invest another 50 million yuan, but required "preemptive subscription rights + share repurchase terms + board seat reconstruction." Lao Chen was still optimistic, after all, the business was still in his hands. Until that board meeting, he voted against it, but the meeting still passed the resolution.
"At that moment, I suddenly realized that my vote against it was useless." Lao Chen said in a deep voice when reviewing with Goheal.
From the contract text, to the arrangement of board seats, to the adjustment of voting rights ratio, each step is reasonable and legal, but together it is a "beautiful combination of punches", which directly pushed his actual control to the "sideline".
2. The transfer of controlling rights does not only happen at the moment of "selling shares"
In the capital market, controlling rights are not equal to the number of shares held. In Goheal's project practice, we often use a metaphor: controlling rights are like "steering wheels". You don't necessarily sit in the main driver's seat, but if there is no steering wheel, even if you hold the car keys, you can't drive the car.
In the actual operation of control rights, "hiddenness" often comes from the following key points:
First, voting rights delegation. This is the most common and "mild" way of controlling rights. The investor does not necessarily have to let you give up your shares. Just signing a voting rights delegation agreement can make you "shut up" on key occasions.
Second, VIE (Variable Interest Income Enterprise). Especially in some industry scenarios where direct shareholding is not allowed, investors form actual control over the target company through a series of agreements. The founder still "holds control" on the surface, but has become a "puppet".
Third, the "two-tier equity structure" is nested. In the early stage, the founder took the initiative to design the AB share system for "quick company decision-making", but after the capital increase, it was countered by the AB structure. Once the B equity is greater than the A share, no matter how many shares the founder holds, he cannot unilaterally initiate any action.
Fourth, the actual controller penetration chain design. This term sounds complicated, but it is a "high-frequency move" in many cross-border mergers and acquisitions handled by Goheal. By designing multi-layer holding companies, the founder's control will is "diluted" layer by layer, so that he eventually loses his actual voice.
3. "He didn't sell the company, but the company no longer belongs to him"
Lao Chen is not the first, nor will he be the last founder to realize that he is "controlled without being informed". He even retains the most shares in the company, but he can't even nominate a senior executive.
This is the "cleverness" of the transfer of controlling rights - it does not happen the moment you sign the transfer agreement, but when you think "it can still be discussed", the transfer has been completed quietly.
The deeper concealment lies in the "gentle trap" of capital rhetoric:
"In order to prevent infighting among the management, we suggest adding a special voting rights mechanism."
"This voting rights delegation is only temporary, and you will still be the leader in the future."
"We will not interfere with your daily operations, and controlling is only for financing security considerations."
In Goheal's past consulting projects, we even encountered the four-fold nesting of "bet + repurchase + special veto + board reorganization" hidden in the investment agreement, and a set of clauses can lock all the founder's initiative within three years.
What entrepreneurs fear most is not being acquired, but being controlled unknowingly.
4. The transfer of controlling rights is not a black-eating-black, but a script game
This is not to sing the bad news of capital, nor to advocate "founders don't want financing." In fact, our position at Goheal has always been clear: capital + founders are always the "dual engines" of value creation, but we must see the "script direction" of the control structure clearly.
The game of controlling rights is a chess game within the rules. No one is an absolute "loser", but those who do not understand the script are destined to become "temporary actors" on the stage.
If you are a founder, please remember: financing is not "others give money", but "you change rights", and behind every % number may be the reconstruction of power.
If you are an investor, you must know when to stop. Control is not the goal, and value growth is the basis for long-term win-win. Too quickly to empty the founder will only ruin the product, disperse the team, and cool the project.
And if you are standing on the edge of "control transfer", you might as well find a partner who really understands capital structure design-Goheal has always been helping entrepreneurs and capital parties to reach a "rational acquisition structure" with equal rights and responsibilities.
5. Epilogue: Can the founder still hold the controlling rights?
In today's market with fast-paced financing and unpredictable valuation bubbles, do founders still have a chance to "hold on to controlling rights"?
Does all financing mean "giving up power"? Are all transfers of control irreversible?
We want to say: not necessarily.
The key is whether you can design a "control moat" in advance. For example: set Veto rights for key matters; introduce a "golden stock" mechanism to ensure veto by key people; set "power red lines" in future financing through agreements;
Plan the capital path more proactively, rather than taking one step at a time.
As Goheal often says in mergers and acquisitions, restructuring, and transfer of controlling rights projects: "Capital can bring resources, but you have to give it boundaries." This is the true maturity of the founder.
Goheal Group
So what do you think? Is the transfer of controlling rights an irreversible fate, or a negotiable reshaping of power? Welcome to talk to us about your views in the comment area. We also welcome you to forward the article to friends who are raising funds, maybe it can help them keep an extra "steering wheel". ”
【About Goheal】Goheal is a leading investment holding company focusing on global M&A holdings. It has been deeply involved in the three core business areas of acquisition of listed company control, M&A and restructuring of listed companies, and capital operation of listed companies. With its profound professional strength and rich experience, it provides enterprises with full life cycle services from M&A to restructuring and then to capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
