Corporate governance is simple.
It starts with an idea and its creators. We call them founders.
In the early days, founders build an idea into a company. They grow that company with a community of friends, family, teams and professional investors. Everyone in the community is rooting for the founders’ success and are financially invested in the company’s growth. We call these community stakeholders. Stakeholders hold a financial stake in the company.
Naturally, as the company grows in financial value, stakeholders will insist on creating rules and processes to protect their financial stake. These rules and processes are written out and detailed throughout various agreements, contracts, policies, and resolutions. These are rules that set roles for the board of directors, relationships between shareholders and vesting schedules for the teams.
This collection of rules and processes are what we call corporate governance. Their goal is simple: to maintain a transparent company that balances the financial interests of stakeholders’ share ownership.
Strong corporate governance is fundamental to raising money. New investors will often require certain updates to your corporate structure. In order to do so, you will go through a due diligence process. This means looking closely at your corporate governance since day one of the company’s incorporation to understand the legal and financial health of your company.
Practice strong corporate governance now to become a more investable company.
Here are healthy practices you can start now:
- Review your share register (or capitalization “cap” table) to be sure it is compliant with local laws;
- Create an organizational chart for your existing company and stakeholders (build one in Google Docs here);
- Build a balanced relationship between board members who all have clear roles and terms;
- Create and sign company resolutions for important decisions like new investments or filing with your corporate registry;
- Use accounting software like Quickbooks or Accounteer to maintain clear financial records for any audits.
To make sure you’re on the right track, start with looking at your company’s by-laws (otherwise known as memorandum or articles of association). If you can’t find one, ask your corporate secretary. In countries like Kenya, Ghana, Mauritius, and Nigeria, your corporate secretary is responsible for maintaining your corporate governance and records.
Corporate governance is about transparency. The stronger the corporate governance, the more ready you are for growth.
Until the next post! #keepbuilding
DISCLOSURE: This communication is on behalf of Raise Impact Technologies Inc., (“Raise”). This communication is not to be construed as legal, financial or tax advice and is for informational purposes only. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Raise does not assume any liability for reliance on the information provided herein.