In answer to the legal side of Patricia's question on finding "an investor to become a co-shareholder" in her stationery company, Francine Howell-Bryce, attorney with DunnCox law firm, replies.

What Patricia should do:

Identify your company's needs, which include determining the amount of money required and whether the company would benefit not only from an investor with financial resources, but also one with skills relevant to the business.

Determine the proportion of the business you are willing to give up in exchange for the investment.

Identify appropriate persons with the required financing and skills who might be interested in investing in your business.

It is important that you ensure that the person not only possess the attributes necessary to assist your business to grow, but is someone with whom you could work and get along.

Attract investors and generate interest in your business by providing information on the company, including the Articles of Incorporation, the current financial position of the company, and its future prospects.

The store owner is advised to negotiate and agree with the potential investor the terms of the relationship such as:

1. Share price. The price of the shares can be determined having regard to the value of the company, the amount of investment required, the contribution of the investor in terms of money and skills.

2. Control. How much control would the investor be given? You may want to ensure that in issuing the shares, you maintain majority shareholding and effective control of the company.

3. Dividends. If the company plans to pay dividends, you must determine a dividend payout policy.

4. Restriction on transfer of shares in the event a shareholder wants to leave the business. For example, you may require that the shares must be offered to the remaining shareholder first before being offered to anyone else.

5. Roles and responsi-bilities of each share-holder. Whether the new shareholder would also serve as a director of the company (executive or non-executive) and whether to pay a salary for the skills contributed in the day-to-day operations of the company. Determine whether directors would be paid a fee.

Patricia would need to allot and issue shares to the new shareholder, which requires a resolution by the company for the issue of a certain number of shares.

The share certificate(s) would then be given to the new shareholder and his or name entered into the company's register of members.

When she has found the person, Howell-Bryce advises, Patricia would need to negotiate terms of coownership. It is recommended that theses terms are set out in a shareholders' agreement with the help of a lawyer who specialises in commercial matters.

Email Francine: francine.bryce@dunncox.com