Hi - i have a concept that i have seen work in an Auction site in NZ here and i just thought it would be good to get some other opinions on the matter.

In order to get more clients for the long term i took the idea of this company in NZ and slightly modified it to my business plan.

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Basically it works by instead of offering clients 1 month free etc or whatever special promo you may offer - i would be offering a "Share" in my company.

So basically Joe blogs wants a hosting provider - i have a promo "Sign up today and we will give you "25" Shares in "HostOne Limited (Inc or whatever you want)".

So basically i am offering clients equity in my company as an incentive for them to sign up. Now say that the company has 1 million shares and only 24% will be offered to clients, and the remainder will be held by myself with a 76% share. Enough to pass a new constitution etc without the need to get the other shareholders approval.

Now obviously i would also offer them say 50 shares per affiliate sign up etc. Customers would NOT have to accept the shares if they did not want to so it would be voluntary if they wanted to accept them.

Now shares would also be dividend bearing if we declared a dividend. Now the trick would be - once a nice size able customer base was reached, i would then make a takeover bid, or the company would make a share buyback and offer them $0.20-1.00 per share. If they held say 50 shares we would still be on a win as they would have paid us more in the long term than we would be paying them for the shares. This would also then allow me to take back 100% control.

I would appreciate all your feedback and if you have any suggestions etc please make them.

I would look real hard at what is required to take a company public. Cause if I understand the law correctly that is what you would need to do in implement your plan.

My guess is you are looking at a min of about 25 to 30k in legal and accounting cost to get started.

I would not be offering the shares to the general public so it would not be any different to offering shares to say family members. I am not offering an IPO or taking the company public as in it would be listed on a stock exchange so in the respects securities laws would not really apply.

But please remember that i am in NZ and laws change as for different countries. But thanks for your help ;-)

Excuse me for being upfront about this, but why make it so complicated? You don't *need* to offer shares in order to get clients. Yes, it is a unique idea and I have to say that it's nice to see people thinking in different ways to do things.

Anyway, I see it as a huge mess in order to do all the accounting and billing for that, especially for tax purposes. I don't know about exact laws in NZ, but if there is any tax on increase in the stock's value, then that could be an issue for handling taxes for so many people at once.

My recommendation is to leave this to another side of the business and focus on other aspects. It seems that HostOne was launched not too long ago and so I would try and make sure that your clients are fully satisfied, have all the tools they need, and go out of your way to make a good impression. Word of mouth is the strongest tool you can have so make sure to utilize it well, even if you just have 1 client.

I was trying to picture myself going with a service provider (any kind of provider) and being excited about getting stock/shares in the company as a promotion. It makes me feel trapped.

--Tina

I would not be offering the shares to the general public so it would not be any different to offering shares to say family members. I am not offering an IPO or taking the company public as in it would be listed on a stock exchange so in the respects securities laws would not really apply.

But please remember that i am in NZ and laws change as for different countries. But thanks for your help ;-)

You said you were in NZ I got that and the laws are not difference from the ones here in AU.

I would advise you to check with a solicitor before you go ahead with this idea. The CPA sitting here next to me seems to think you would and also deal with the ongoing reporting issues that a company with share holders has to issue.

I was trying to picture myself going with a service provider (any kind of provider) and being excited about getting stock/shares in the company as a promotion. It makes me feel trapped.

--Tina

You may feel trapped but many would be interested since the lack of retirement benefits and the status of Social Security in the US has become a major issue.

I wouldn't feel trapped either. Owning shares in a company doesn't mean I have to use there products.

Where they are free that is just an added benefit.

Although I do agree it would be an accounting nightmare to do this.

Also, a US company does not need to be "Public" to offer shares as long as they are doing it on a limited basis.

You should check the legalities of it though for safety reasons.

You may feel trapped but many would be interested since the lack of retirement benefits and the status of Social Security in the US has become a major issue.

I wouldn't feel trapped either. Owning shares in a company doesn't mean I have to use there products.

Where they are free that is just an added benefit.

Although I do agree it would be an accounting nightmare to do this.

Also, a US company does not need to be "Public" to offer shares as long as they are doing it on a limited basis.

You should check the legalities of it though for safety reasons.


You would run into the same law in the US that you would here in AU, you are advertising and offering to the general public shares of a company. You can try and squeeze around the law by saying you are not selling the shares only giving them away. But chances are any good lawyer or accountant will tell you that you that as long as you are allowing the general public to get shares and advertising such you are going to have to do a full disclosure and reporting.

The limited offer only covers as long as it is not advertised to the general public and once you put the offer on your web site you are opening it to the general public.

Interesting idea. This seems to be somewhere around the lines of the DreamHost.com . They market their service as "Employee owned webhosting". It seems to work for them.

You can possibley advertise this as "Customer owned webhosting Livin it up since xxxx". And place a very ugly client on the homepage :) .

I'm sure its not something you will be able to put up overnight. You need to check with Laywers, CPAs etc.. Becuase if you do it wrong, it will bite you real hard.