You would never really spearhead a company if you did not believe it was bound to grow into something great. And although you have your business plan and that assurance in your heart, most times you’d be disappointed to find that other people cannot see what you see. But it’s okay though… after all, all the biographies you’ve read tell of a compulsory phase when no one believes in your dreams.
So imagine your joy when you find someone who, not only sees what you see but is also willing to work side by side with you in making this dream become a reality. It’s like the both of you are Cyclops(es) in this unseeing world. You’re both happy and you both vow to show these naysayers.
But then this raises fundamental questions: If (and when) you show the world that your idea is all forms of amazing, wouldn’t they want to buy in as well? Wouldn’t the crowd come tearing down your company with requests to own shares and therefore own the company with you? Wouldn’t you actually need their investments to scale? Wouldn’t their co-ownership of the company take away some powers from your hand?
The need for other people to invest in your business might never really be avoided. But here are 5 legal tips which may be useful for you and your excited Co-founder to (kinda) still stay on top of things:
- Own substantial shares. This basically means that each of you should own at least 10% of the total number of shares in your company. One of the pretty cool benefits that come with being a substantial shareholder is that you can demand for voting to be by poll and not just show of hands – this means votes will be counted by how much shares the voters have (it’s like the Boardroom version of ‘if you no get money, hide your face’).
- Founders Agreement.
- Make you and your co-founder, Life Directors. Please note that a life director is NOT a director that can only be removed when he dies. A life director CAN be removed as a director in his lifetime. The benefit he enjoys, however, is that he is not subject to retire by rotation (read Section 259 of the Companies and Allied Matters Act 2004)
- Be a compulsory signatory to the company’s account. Duh.
- Shareholders’ Agreement. Ensure that you draft a comprehensive shareholders’ agreement to govern the relationship between the shareholders and the company
Don’t forget that once you start to invite other people on your Board and to buy shares, you cannot have 100% say-ship on what happens in your company anymore. But it’s not always a horrible experience, and there are definitely more things you can do to protect your interests in your company. In fact, you can have control over the kind of people who are allowed to buy into the company; especially if it’s a private company. You can even include a pre-emptive rights clause in your Articles or Shareholders’ Agreement to ensure that no one sells their shares in the company without first offering it to the existing members.
Finally, whatever you do, do not forget to seek professional advice from trusted people.
Adeboro Odunlami is a writer, lawyer and photographer. She currently works as an advocate for Digital Rights in Africa and as a Policy Analyst. Check her out on social media: Facebook and LinkedIn- Adeboro Odunlami, Twitter/Instagram- @tzboro. Read more stories on her blog- http://adeboro.com