Question

Donna formed a corporation several years ago by issuing 500 shares of stock. There are 10 shareholders, with the smallest shareholder owning 25 shares, and Donna holding the most at 100 shares. The corporation needs additional cash, but the current shareholders do not wish to have any additional shareholders.

a. What are their options and what additional factors should the current shareholders consider in raising the additional cash?
b. What can Donna do to add additional shareholders, if anything?

Answer 1

A) If Donna's corporation will not accept new shareholders, they can raise money by issuing bonds or getting a bank loan.

B) Maybe the current shareholders don't want to divide their power within the corporation, so maybe Donna can convince them of issuing preferred stocks which does not give the new stockholders voting rights.