Are you thinking of Partnering for Business | woman at work

Are you thinking about a Business Partner?

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When an entrepreneur decides to start a venture, there are many things buzzing in her head. Product or Service Quality, Marketing, Branding, Financial Planning and more. Usually, the legal angle is not given due thought because most start ups are busy starting up and want to focus on what they think is a mustdo. But It is imperative that new ventures proactively understand the areas they should do due diligence in because the result of not doing it might cause potential litigations.
One of the first areas I would urge startups or new ventures to focus on is about choosing a business partner. By far the most important but ignored issue is that of finding the right business partner. It is a cliché that one should do business with the “like minded”. The point really is that in a country of such cultural diversity as ours, it is only logical to expect that the first generation entrepreneurs would bring to the business table, the reflection of their social backgrounds and therefore work cultures.
In my experience in handling multitudes of cases for Startups and SMEs, the legal tangles can even lead to survival challenges to many a venture. I would advise every startup entrepreneur to ask these fundamental questions to herself while choosing a partner.
1. Does my prospective partner share my vision of growth of this business?
2. What is my partners family, social, and financial background?
3. Have I made some enquiry about my partner’s interaction with his/her colleagues either as co-employee or as erstwhile business partner?
4. Does my partner understand the concept of sanctity of a written contract in the context of avoiding friction and disagreements in the future?
5. Does my partner agree that world over, one of the pillars of successful businesses is effective and timely advice from qualified and experienced professionals?
6. How important is it to my partner that there should be complete transparency between the partners and a hundred percent compliance with ALL applicable laws?
The National Company Law Tribunal ( NCLT), was a court created in 1988 to take over the specific and limited jurisdiction of the High Court to deal with disputes between shareholders or partners of a company. A Rs.100 crore company died a slow painful death because of such a litigation and because the co-shareholders could not settle their disputes even though they were from the same extended family.
‘Business ethics’ are far from evenly distributed even amongst people related to each other. An overwhelming majority of the disputes could have been avoided if the partners had asked themselves the questions listed above. The importance of the questions above get magnified when one is looking to doing business within the ‘family’. Given the emotional undercurrents in a litigation involving family, amicable resolutions in such cases have been rare to come by.
Litigation of any kind is a huge drain both on personal and corporate finance, apart from being a huge emotional drain, depriving the parties of valuable time and energy that could have been deployed more constructively in business. So a positive start in getting the ‘right’ person to partner with you could go a long way in shaping your dream venture.

About Author

Manoj Wad

Mr. Manoj Wad is a leading Corporate Lawyer and Partner at J S Wad & Company. In his career spanning 27 years, he has practiced in the Supreme Court and is on the legal advisory board of leading Multinational and Indian companies. His firm provides a bouquet of legal services to assist individual professionals, start ups and established business entities in their vocational and professional endeavors.

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