Before you ‘place’ your money in a business, keep in mind some tips that will help you get the right investment:
- The person, in the foreground. “More than in the business itself, we must look at the management team or person who will be at the forefront of the activity,” the experts explain. “A task that goes to investigate what is your career and your capabilities, key information to make sure you will be an appropriate partner.”
- Give up extravagant adventures. For the financial expert Cecilia de la Hoz, “you have to understand very well the business you enter. It does not make sense to invest in nanotechnology because you have been assured that it is a good alternative, if you do not have sufficient training or experience to evaluate its viability. “
- The partner does not live on money alone. It is an added value that the capitalist partner, regardless of money, contributes his experience or contacts in the market. From the Chamber of Commerce of Madrid, recommends not to be a passive “that only expects the return of investment.”
ASK FOR THE SALES NOTEBOOK
For the expert in Commercial Law Estíbaliz Cerrillo-Gómez, “it is essential to know the difficulties of obtaining dividends in the first years”. Cecilia de la Hoz adds that, if what is sought is a temporary investment with a specific date of departure, perhaps this type of operations are not the most appropriate. “In addition, it will not always be possible or convenient to divest when you want.”
All data. If one really wants to have in his hand all those data that will guide him in making one or another decision, it is best to request a sales notebook, as the expert Mariano Alonso points out. It is a document that contains a very complete information of the project. From the services offered, to your organizational chart or clients, through the marketing strategy or management lines to follow during the next exercises.
WHO MAKES THE DECISIONS
Once inside the project, the capitalist partner will ask himself how he can influence his progress if he will not work on it. It must be borne in mind, first of all, that decision-making in commercial companies is divided between an administrative body and the board of partners. While the first deals with the most everyday aspects, the second addresses the most important issues, such as the change of corporate purpose, the expansion or reduction of capital or the modification of bylaws.
From here, the investor will define, together with the rest of the partners, their level of involvement in the project. And although it does not provide work, you can participate in the management of some or other way.
Greater involvement, more responsibilities. In the case that you want to be more above the activity, the partner will enter the administrative body and will be placed as administrator. This figure entails acquiring more responsibilities, “which, at times, can be criminal in nature,” warns Cerrillo-Gómez.
With voice and vote. In general, the capitalist partner will vote at the general meeting, which must be held at least once a year. In this body it will have a number of votes proportional to its participation in the share capital, unless the bylaws establish a different relationship.
Without voice or vote. There is also the possibility of subscribing capital without the right to vote, with which the degree of involvement will be null. But in exchange for losing this power, you have the preferential right to receive a minimum annual dividend.
ATTENTION TO POSSIBLE COUNTERS
The truth is that conflicts may arise between the partners as a consequence of the different interests and concerns shown by both actors. The causes? The capitalist partner usually has a short-term view when looking for the return of the investment made. On the other side, the manager will develop a more long-term policy, which means allocating part of the benefits to investments with which to meet the day-to-day needs.
Another possible conflict, as Cecilia de la Hoz points out, “can happen when the entrepreneur asks for a good salary for being at the front, while the capitalist seeks to reduce costs.”
To avoid these frictions, it is essential to maintain fluid communication, underlines Mariano Alonso. Of the same opinion is the expert Carlos Abarca. “If you receive information constantly, the investor will know what is the situation of the company and their needs at all times, which will help understand the worker’s decisions. “
WHAT TO DO WITH THE BENEFITS
Another key to avoid conflicts is to be clear about the fate that will be given to the economic results of the business:
- How to divide the dividends? The Law establishes that, except as otherwise provided in the bylaws, the distribution of dividends will be made in proportion to the participation of the shareholders in the capital. Estíbaliz Cerrillo-Gómez clarifies that it is possible to design alternative formulas to those of the norm to distribute those benefits. “Clauses could be included that took into account the work of the partner in charge of the business or the number of clients that it has captured”.
- And what to do with the losses? The company would have to have some reserves or own funds with which to face possible losses. Otherwise, we should look for other alternatives to obtain liquidity and, thus, combine that negative result, warns Abarca. “This would happen to sell assets, move the business to another cheaper place or reduce staff, among other options.” And, ultimately, the partners could reach an agreement to inject capital – in proportion to their shareholding – in order to continue with the activity.
THE EXIT OF THE BUSINESS
What happens when the relationship ends? Once he decides to leave the company, the capitalist partner will divest himself of his actions, an operation regulated by law. In this sense, and unless otherwise stated in the bylaws, there will be freedom to transmit shares between partners, as well as in favor of the spouse, ascendant or descendant or group companies.
In the rest of the cases, the transmission is subject to the rules and limitations established in the bylaws and, failing that, to those of this law. Some of these indications must be kept in mind:
• The transmitting partner will communicate his intentions in writing to the administrators, which implies specifying the number and characteristics of the participations, the identity of the buyer and the price and other conditions of the operation.
• The bylaws can not include clauses that require the member to transmit a number of shares different from the ones offered.
CONTROL THAT THE BUSINESS IS MANAGED WELL
By not being present in the business on a daily basis, one of the great dilemmas of the capitalist partner is how to control that things are doing well. Here we show you techniques with which to banish this ghost:
Prepare a roadmap. Antonio Sala advises that it contains the management guidelines and the terms of the relationship between the owners of the business.
Watchful eye! Ana de Santiago warns that it is vital to be on top of the business to monitor its evolution. “This would involve organizing periodic reviews or planning the results to check compliance with the objectives set.”
Inspection tools. The partner has to assess the existence of specific tools with which to perform the control, “as is the case of a computer system that records daily sales or inventory turnover,” says Mariano Alonso.
Legal resources. The law offers tools to carry out this surveillance work. Specifically, some of the articles of the Law of Limited Liability Companies. The SL is the legal formula chosen by entrepreneurs “90% of the time,” says Cerrillo-Gómez. In this way, article 86 contains, through three points, the right to examine accounting:
• As from the announcement of the general meeting, any member can obtain from the company, immediately and free of charge, the documents that must be submitted for approval, as well as the management report.
• During the same term and, unless otherwise provided in the bylaws, the partner or partners representing at least 5% of the capital may examine the documents that serve as support, either on their own or in conjunction with an accounting expert. and of antecedent of the annual accounts.