Connect with us

Starting a Business

I am a 10% partner in a business. My partner no longer puts in real effort and rarely comes into the office. What can I do?

How to ensure your partnership is equal and fair.

Entrepreneur

Published

on

“Your partner is the majority shareholder and as such is the owner of the business. The business owner can come to work when and if they want to as the Basic Conditions of Employment, such as hours worked, do not apply to business owners. Even though you own 10%, because the share holding is so small, you are technically an employee,” says Ask Entrepreneurs’ legal adviser, Michelle Venter.

The best option

“Try the reasonable approach. Call a meeting, face-to-face, and discuss your concerns with your partner and find a solution that is acceptable to both parties”, advises Venter.

Mediation and arbitration

If this fails, mediation could be the next option. In this forum, the dispute is handled privately, behind closed doors. An impartial third party will hear the issues in question from each side’s perspective. He or she will then work with both groups to find possible solutions and/or compromise.

However, mediation only works if both parties are genuinely sincere in trying to work out their differences. A mediation agreement is binding. Once both parties agree a contract can be drawn up, signed, and will be legally binding. It is cheaper than paying attorney fees, court costs, and deposition fees.

If you cannot reach an amicable solution through medication, an attorney who will act as an outside arbitrator can be appointed to try to break the stalemate. You would need to consult a professional dispute resolution law firm.

Easy solution

“If you are very unhappy with the situation, the easiest thing to do is to ask your partner to buy your shareholding, and you can move on,” recommends Venter.

It isn’t easy for a minority shareholder to buy out a majority shareholder

If you can show that there are performance issues that are affect the profitability of the business because owner does not show any interest in the business, you may be able to buy out the majority partner. If this were the case, you would have to raise the money for the buy out.

  • You could take a loan and buy her out
  • You could find a new partner and between you buy her out.

Does a partnership agreement exist?

However, a partnership is much easier to get into than out of. You need to review the partnership agreement to understand what rights you have. However, you may need to consult with a lawyer to find out what your rights are in terms of the partnership agreement. If there isn’t a partnership agreement then you would definitely require legal guidance in terms of how to proceed.

Look out for a Non-compete clause

Did you sign a non-compete clause? The non-compete agreement ensures that upon the termination of the employment period, the former employee will not engage in activities that place him or her in direct competition with their former employer.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

Advertisement
Comments

Starting a Business

What are the do’s and don’ts of securing an online domain name?

We asked Domains.co.za founder, Wayne Diamond, what the do’s and don’ts are when it comes to entrepreneurs registering domain names for their start-ups…

Wayne Diamond

Published

on

There’s that L-word again:

“Location, location, location”. It’s the make or break decision. Every estate agent and business owner cannot overemphasise the importance of this Critical Business Decision Number 2 (Number 1, of course, has to do with what you’re going to sell!).

Related: As a start-up, what are the most important areas I should be looking at?

 

Whatever business you’re in, being close to customers and convenient to business partners and suppliers is essential. That bricks-and-mortar wisdom is equally true in the world of online commerce. Having the right domain name and the right support for your online presence has emerged as a real driver of success.

Some figures put the scale of the opportunity into perspective: US e-commerce is predicted to reach $440 billion by 2017, showing a compound annual growth of 13.8%[1]. While the Internet economy is in its infancy in South Africa and Africa, it is growing strongly: research by World Wide Worx showed that consumers, small and medium businesses and government were already purchasing products and services worth R59 billion on the web three years ago.[2]

So how to secure the best and most profitable Internet real estate to make sure your business can ride the e-commerce wave?

It’s all in the name:

The first decision is what domain to use. One of the exciting developments is the launch of new Internet domain names, so it’s definitely no longer a choice of .com or .co.za. The proposed dotAfrica (.africa) geoTLD (geographic Top Level Domain) is one option that’s set to come online around the first quarter of next year, but what about the ZAdotCities domains of .joburg, .capetown or .durban? Domain names within these additional geoTLDs will be able to be snapped up by the public around November this year.

While .com remains a good choice for truly international businesses, choosing a domain name with some local flavour is probably going to work well for many companies.

The greater range of domain names also makes it more possible that you will be able to choose the right name for your business. When it comes to the more established domains, like .com or .co.za, chances are higher that the name you want has already been taken.

When it comes to that all-important name, received wisdom used to be that short was best, but the trend nowadays seems to have reversed—even phrases are now used. The key is to choose a name that is easily recognisable, that will stick in peoples’ minds and that describes the business well.

Perhaps a good example is the domain used by the writer of this article: www.domains.co.za is both a brand name and a name that perfectly describes the nature of the business. At just seven characters in length, “domains” is also an easy to spell, easy to remember word – keeping names under ten characters is guaranteed to help audience recall.

Something people will remember easily is absolutely vital.

Some companies use specific names for individual campaigns, but always make sure the business as a whole has its own web address.

Experience has shown that it’s probably worthwhile to register similar domain names to the one you choose, just to keep competitors from taking them in an effort to sow confusion.

My final advice: it’s always a good idea to use an ISPA (Internet Service Providers’ Association of SA) member to help you register the chosen address of your start-up. That way you’ll be sure that all the formalities are correct, and that the company you’re dealing with abides by ISPA’s code of conduct.

Finally, as there are already almost 950 000 .co.za domains registered, it’s a good idea to surf to www.domains.co.za and perform searches to see if the domain you would like is indeed available.

Related: Does the South African government award grants to franchisees?


[1] Chuck Jones, “Ecommerce is growing nicely while mcommerce is on a tear”, Forbes, 2 October 2013, available at http://mashable.com/2013/02/05/ecommerce-sales-top-1-trillion-worldwide/.

[2] “Internet 2% of SA economy”, 29 May 2012, available at http://www.worldwideworx.com/internet-2-of-sa-economy/.

Continue Reading

Starting a Business

How to protect your business idea when sending them to financial instituitons?

Signing an NDA, is it necessary?

Anton Ressel

Published

on

How can I protect my business idea before I submit my business plan to financial institutions and other agencies for help?

You have a few options:

Firstly, you can include a disclaimer as an introductory clause, saying that any and all information contained in the business plan and related documents remain the Intellectual Property of xxx (your name) and may not be reproduced, copied or used in any manner without express written consent. This is not legally binding, but usually enough.

Secondly, you could ask them to sign a non-disclosure agreement, which is more binding from a legal perspective. The downside of this is that it can come across as arrogant, especially from someone who is approaching us for help. Personally I refuse to sign any NDA from clients who approach me for help, it just smacks of mistrust and arrogance.

On a final note, good ideas always get copied. If you are that worried that your idea will be stolen, you may need to re-look at it and find ways to make it difficult to replicate, or better yet, make sure you are first to market.

Related: As a start-up, what are the most important areas I should be looking at?

Continue Reading

Starting a Business

Does the South African government award grants to franchisees?

In my experience, unless you as the entrepreneur have some ‘skin in the game’ and a reason to get up and make the business work every morning, it seldom will.

Anton Ressel

Published

on

I am considering purchasing a children’s education franchise and wanted to know if the government offers grants. The cost of the franchise is R 86 000. If so what are the criteria to qualify and how does one go about it?

Accessing grant funding for a franchise may prove challenging, unless that franchise is registered and accredited, in which case there is a fund that may consider it – see CNBC for more info.

Otherwise, you could look at www.investmentincentives.co.za and see if any of those sources of financing are of interest. It naturally depends on your own PDI (previously disadvantaged individual) status as many of these funds are focused on youth, women and PDI’s.

Finally, on an emotional level I would caution against going all out for grant funding and not loan finance. In my experience, unless you as the entrepreneur have some ‘skin in the game’ and a reason to get up and make the business work every morning, it seldom will.

 

Continue Reading

Trending

FREE E-BOOK: How to Build an Entrepreneurial Mindset

Sign up now for Entrepreneur's Daily Newsletters to Download​​