Speed is so important for startups. Of course, it’s not the only thing that is important in a startup journey but it is one of the things that you need to have if you want to be on top of the game against to your competitors.
New startup entrepeneur vs seasoned entrepreneur
As a startup lawyer, I’ve been fortunate to work with so many aspiring first time entrepreneurs trying to get their first company off the ground to seasoned entrepreneurs who have exited their previous business.
One of the things that differentiate a new entrepreneur against a seasoned one is the choice of the service providers including the company secretary for their company. Since seasoned entrepreneurs have exited once or worked in startups before they know they need to have an “A-team” for their management team. This also extends to having a good and trusted service provider helping them with their business growth.
I’ve seen too many times founders spent a great deal of time explaining to their company secretaries what they are trying to do. It can be a simple seed round or capitalisation of shares. This can be a crucial time when you have a low cash runway to get money in fast.
Maybe you’d argue why does it matter which company secretary you decide to work with so long as they get the job done. Whether you like it or not the choice of your service provider also reflects on you as an entrepreneur or founder. Imagine working with someone that has zero experience in dealing with fundraising and startup work. I don’t know about you, but it sounds like a potential nightmare for me (as the legal counsel) and the investors that need to deal with the company secretary.
Several years ago, I worked with a client who is a new founder trying to get his startup off the ground. He has recently set up a new company with a company secretary referred by a family friend.
During the investor’s meeting, I saw that the company secretary looked troubled and confused at times. After the investor had left the meeting, the company secretary told us that he could not do the work because he is not familiar with preference share issuance. I also found out later that the company secretary just started his new corporate secretarial practice. So that may explain why he may not have the experience in dealing with different investment instruments, including preference shares, including the paperwork needed to get the investment issued to the investor.
Why does it matter who I choose as my company secretary for my startup?
Imagine a simple document that needs to be signed off by all shareholders. They are still company secretaries out there that insists their clients to sign on a physical document. Then signed document then needs to be couriered back to the company secretary after all parties have signed off the same document.
This story happens so many times. Precious time gets wasted waiting for the paperwork to get done. The whole thing can be pretty costly, too if you have signatories living in several locations. For example, if you have investors that are based overseas they may also need to print and courier the signed contract back across several continents back to you. It is no fun.
Another usual corporate work is fundraising. Before a venture capital decides to invest in your company, they will usually appoint a legal counsel to conduct legal due diligence. We have worked with seasoned entrepreneurs. They typically have good company secretary helping them with the process. They tend to be more familiar with the process.
It makes our job so much easier as legal counsel when the documents are uploaded nicely and sorted in folders in a shared cloud folder in a Google Drive or Dropbox. I’ve had times when I was a younger corporate lawyer. We had to spend weeks in a company secretary’s office because they just won’t let us have a copy of the document. So we had to go to their office to see and review the physical records. This delays the whole audit, and we will also chargeback the travelling costs to the investor. This entire thing could’ve been sorted in several hours now get dragged for because of a signature.
A bad company secretary will slow down your fundraising round. Of course, you can always replace a company secretary with a new one but the process is not straightforward and may take several weeks if not months to get the entire documents transferred from the outgoing company secretary to a new one. And you can’t be changing company secretary every month or too often or that may raise some ‘red flags’ to the investors too.
Ask around for referral from friends, especially your seasoned entrepreneurs’ friends for a good company secretary. I am confident that you’ll be able to find a good one.