Shopify Inc. is proposing changes to its governance structure to preserve founder and CEO Tobi Lutke’s voting power, but to provide forfeiture provisions that prevent him from devolving that power.
Under the new plan, Shopify Lutke will issue a founder’s share that will have a variable number of votes that, along with its other holdings, will account for 40 percent of the total voting rights associated with all of the company’s outstanding shares.
That compares to the current system, where Lutke controls just over a third of the company’s voting shares.
The new system will give him more power, but it comes with some conditions. Its Founder Shares are non-transferable and will expire when Lutke ceases to serve as an officer, director, or consultant whose primary function is in the Company, or when Lutke, his immediate family, and its affiliates cease to hold Class A and Number shares Class B Shares for at least 30 percent of the Class B Shares that they currently hold.
In the event the Founder’s Share expires, Lutke will also convert its remaining Class B Shares into Class A Shares.
The plan requires approval by a two-thirds majority of Shopify shareholders voting collectively as a single class and at least a majority of the votes of shareholders, excluding Lutke and his employees and affiliates.
The company is also proposing a 10:1 split of its Class A and Class B shares. The stock split requires a two-thirds majority of Class A and Class B shareholders voting together as a single class.