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The Stillbirth of a new Business

I have a nasty habit of eavesdropping on conversations taking place at adjacent tables. While waiting for my friends at a local pub, nursing my favourite drink, I was once again privy to such a conversation.

My tipsy neighbours were discussing their new venture. Their respective roles and responsibilities, profit sharing, and general business ideas were discussed in great detail. Their “meeting” was concluded with a statement by a delegate that they will not “do each other in”, although it was expressed in a much more unsavoury fashion.

Generally, I am not a betting man, but I was convinced that I just witnessed the formation of a new business that is doomed to failure.

Various important factors when discussing the formation of new business were simply amiss from this conversation, including as much as a pen and paper. This new business will very soon be riddled with conflict and disputes and will inevitably end in costly litigation.

Good business ideas should always be bolstered by proper agreements, advice and effective Corporate Governance. No exceptions. (Read more “Corporate Governance at a Glance”)

New business owners should, as the first point of departure, obtain professional advice from experienced and skilled professionals.  These professionals will provide you with advice and guide you to successfully transform your business ideas into a sustainable and profitable business.

What should the new business owner do?

First, get professional advice from a skilled and experienced professional, which advice should include at least  the following:

  • The most suited corporate structure to use e.g. Private Company, Public Company, Trust or Association
  • Advice in respect of the Memorandum of Incorporation, Trust Deed etc
  • The terms and Conditions of any Shareholders or co-operation agreements
  • The necessity for a board charter, specifically where directors of even numbers are appointed and the possibility of a future deadlock is inevitable
  • Compliance Issues relating to the specific business sector eg the Private Security Industry and the Protection of Personal Information (POPIA)
  • Corporate Governance and Governance structures (Read More “Introducing Corporate Governance”) 
  • The need for Statutory Committees e.g. Social and Ethics Committees
  • The need or obligation to frame certain policy’s e.g. Whistleblowing Policies

Pitfalls that new business owners must avoid

DO NOT USE TEMPLATES FOR CONVENIENCE

Being a business owners is not convenient. Yes, there is a million things to do, but this is what your ownership and stewardship of a new business requires.

Do not engage professionals that provide the proverbial cookie-cutter documentation.

All documents should be tailor-made as no business is the same and requires documentation and advice that suit its individual needs.

BEWARE OF PROFESSIONALS THAT ENCOURAGE SHORTCUTS

Avoid professional advice from persons or institutions that do not engage you in all the aspects referred to above. Consider this failure as a telltale sign of a lack of necessary experience.  

BE CAREFUL OF THE FEES – GET UPFRONT ESTIMATES

Exorbitant Fees! Be sure to obtain an estimate of fees before providing your advisor with any mandate. Corporate Services is a much sought after field of study for professionals and riddled with those who blatantly overcharge under the guise of being specialists when they aren’t.