The representation that the company may issue additional shares in the future means that the company may dilute the shares of the subscriber at will. A subscriber who does not wish to give the issuer the ability to dilute their shareholding may require that anti-dilution provisions to be included in the subscription agreement.
The largest shareholder (Caitlyn Limited) of Azumah Resources holding 13% of the shares reinvested $2.1 million. As part of the investment, the subscription agreement contained an anti-dilution clause where the shareholder was to maintain its 13% equity holding for 12 months.
- When subscribing to shares of a company, consider negotiating an anti-dilution provision in your subscription agreement to avoid having your equity holding in the company significantly diluted.
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