This archive report was first published on 17 September 2019.
Published on September 17, 2019, a day that highlighted the importance of defining roles of board and shareholders in a company.
As a business owner, I have witnessed firsthand the impact of unclear roles and responsibilities on a company's success. In my own company, I have seen instances where shareholders and directors have taken advantage of their positions, leading to disputes and even threatening the business's existence.
One such instance involved a non-family investor who bought a five percent stake in my company and demanded a directorship. However, this investor soon began to exert control over the company's editorial decisions, demanding that an article be removed from the newspaper because it included quotes from a real estate analyst he had a dispute with.
But that was not the only issue. The investor's company also took advantage of the company's services, accumulating 'dividends' that no other owner or director was getting. This was a clear case of exploitation, and it highlights the need for clear agreements and boundaries between shareholders and directors.
According to the US, many companies insist that to be a director, an individual must be invested in an organisation's shares – be an owner – and must also generate a certain level of business. The principle is that owners must further the interests of the businesses they own and direct.
However, in my experience, this principle is often ignored, and shareholders and directors take advantage of their positions to further their own interests. This can lead to disputes, conflicts, and even the downfall of the business.
So, what can be done to prevent such disputes and ensure the success of the business? Firstly, clear shareholders or directors' agreements must be put in place, outlining the roles and responsibilities of each party. This agreement should include no editorial control, no discounted services, and an obligation to generate business.
Secondly, time limitations must be set on directorships, so that directors cannot hold the company hostage by refusing to sign key returns. And finally, dismissal grounds for directors must be clearly defined, including refusing to sign the accounts unless they are a false representation of the business.
By getting it right from the start, business owners can avoid the pitfalls of unclear roles and responsibilities and ensure the success of their companies.
