How company shares are diluted when a new investor joins in Trinidad

Start with the actual number issued

Imagine a company with 100 ordinary shares in issue. Founder A holds 70 and Founder B holds 30. Their starting percentages are 70% and 30%, assuming shares have equal rights and there are no relevant special arrangements. If the company creates 25 more ordinary shares for an investor, the denominator becomes 125.

Founder A's 70 shares then equal 56%, Founder B's 30 shares equal 24%, and the investor's 25 shares equal 20%. The original founders did not transfer their shares, but their percentages fell because the company issued more shares.

Why 20 new shares is not 20%

A frequent error is believing that issuing 20 shares when 100 already exist gives the investor 20%. The resulting total would be 120, so 20 divided by 120 equals about 16.67%. The correct number depends on the desired percentage of the expanded share count.

If the target is 20% after the issuance and the existing company has 100 equally ranked shares, algebra gives new shares divided by 100 plus new shares equals 0.20. The solution is 25 new shares. In practice, share classes, fractions, authorised arrangements and legal rounding issues require specialist review.

Compare an investor buying from a founder

If Investor C purchases 20 existing shares from Founder A instead of receiving new shares, the company would still have 100 shares in this simple example. Founder A would have 50%, Founder B 30%, and Investor C 20%. This is a different commercial transaction.

Money paid for newly issued shares may enter the company, whereas money paid to purchase shares from a founder generally goes to the selling shareholder, subject to the contract. Founders should understand that distinction before presenting the financing as startup capital.

Legal rights are not always simple percentages

The calculation above assumes one class of ordinary shares with equivalent rights. In a real company, classes may carry different dividend, voting or redemption rights. Certain shareholders may have contractual consent powers over important decisions. Read the Articles, by-laws and shareholder agreement alongside the capitalisation table.

A 20% shareholder may not have the same voting influence in two companies with different share structures. Conversely, a small economic interest can coexist with special control rights. Legal advice is essential before adopting provisions that affect valuation or governance.

Registry and beneficial owner filings

The Companies Registry requires a return within 30 days of share issuance or transfer. It also has beneficial ownership reporting rules covering natural persons with direct or indirect 10% or greater interests and other effective-control cases. New ownership calculations should feed into that separate compliance assessment.

Prepare both the before-and-after share schedule and any ownership chart needed for Form 45. Identify natural persons behind corporate shareholders, and keep evidence of how all percentages were calculated. Save registered forms with the company records.

Build an investor-ready cap table

A practical table records shareholder legal name, share class, shares owned, total shares of that class, percent held and effective date. Build one table for the present and another for the proposed transaction. Then stress-test a further financing round to see how percentages could change again.

An investor can be more confident in a company that has consistent registers, clear rights and traceable calculations than in one relying on verbal promises. Professional review of the actual issuance or transfer should precede any claim that the investor owns a specific interest.

Action checklist

• Confirm outstanding shares and their legal classes.
• Calculate the expanded denominator before promising an investor percentage.
• Distinguish capital raised by the company from existing shares sold by founders.
• Review rights, transfer restrictions and approvals.
• Prepare the 30-day share return and any beneficial ownership update.
• Save dated before-and-after cap tables and supporting resolutions.

Questions people ask

If I own 70 shares, can my percent fall without selling?

Yes. An issuance of additional shares may lower your proportion of the enlarged total.

How many shares gives 20% after 100 existing shares?

In a simplified equal ordinary-share example, issuing 25 new shares results in 25 of 125, or 20%.

Is a cap table a Registry filing?

It is an internal ownership schedule. Proper Registry filings and company records remain separately required.

Official references

Check the responsible authority for instructions that apply when you file. These sources informed this guide:

1. Registry Share Returns
2. Companies Registry FAQs
3. Beneficial Ownership Disclosure

Related BizReg guides

• What should a company know when shares are issued or transferred in Trinidad and Tobago?
• Company director vs shareholder in Trinidad and Tobago: who owns what?
• Does a 10% shareholder need beneficial ownership disclosure in Trinidad?