Startups often bootstrap their growth with investments from the friends and family of founders. But, having too many shareholder agreements without a clear corporate structure nearly sunk a growing consumer goods business years later.
A growing consumer goods business had solicited capital from friends and family, without setting up the right corporate structure to effectively manage the multiple business affiliates. Separately, disgruntled shareholders began taking legal action which, if successful, would have sunk the entire company. Also, as the business grew, the company had a pressing need to raise institutional capital—but they couldn’t do so with their current ownership structure. A governance nightmare in the making.
Recognizing what was happening, we worked to resolve the disgruntled shareholder issues under terms that were acceptable to all parties. Then we helped the business convert to a company group model--with a holding company and multiple subsidiaries to accomplish their legal and product release goals. Next, we guided the business in its journey to create a board of directors; including helping to identify the right individuals and developing the nuanced policy and procedures for excellent corporate governance for this particular set of businesses.
We then guided the owners through the development of an incentive compensation program for the leaders of all its businesses, which were all vastly different in nature and involved different individuals. This created true alignment: ensuring all directors, officers, and key executives were properly aligned with the long-term growth of the business.
As a result of these actions, the company successfully advanced to new heights and is now diligently working through its next exciting growth stage.
