Securing the investment needed to kickstart your adult beverage production is just the beginning. We often discuss investment opportunities for distillers seeking capital to launch their projects. However, it's crucial not to overlook the significance of building and maintaining strong relationships with stakeholders who are backing your venture. Once investment funds are accepted, the entrepreneur holds a responsibility to the investor to fulfill obligations and drive the business forward, ultimately benefiting both parties.
Now, let's consider how to support stakeholders in this scenario. Let's say the entrepreneur leading the business is a director or officer of a corporation. Whether the investment came from a venture firm or an angel donor, once the entrepreneur accepts the funds, they take on a fiduciary responsibility. This duty is the utmost legal obligation between partners. Various roles, such as a bank officer, financial advisor, board manager, and corporate officer, carry this responsibility. In legal terms, fiduciary responsibility consists of two key components: duty of care and duty of loyalty.
Let's delve deeper into the example of our entrepreneur to understand the importance of duty of care for both them and the investor. As the director, it is crucial for them to dedicate the necessary time and attention to ensure the success of the business. It is vital that they do not neglect their responsibilities and jeopardize the company's future. Instead, they should focus on creating a solid business plan, managing cash flow effectively, and devising strategies for sustainable growth.
The entrepreneur should be equipped to handle various tasks and possess analytical skills to steer the business in the right direction. However, it is not solely their responsibility to manage everything on their own. Instead, the director can and should enlist the help of experts in areas where they may lack expertise. For example, hiring a qualified accountant to fulfill these obligations would be a wise decision.
Taking care of operations and addressing important tasks that need corrective measures is also crucial.
The duty of loyalty is complex. One aspect involves the director or entrepreneur prioritizing the company's interests above their own. It is not recommended for them to set their own salary. Instead, it is advisable for other directors and key individuals in the business to determine the appropriate compensation for the entrepreneur.
Similarly, the individual should avoid using the business for personal gain. For example, if the entrepreneur comes up with a new beverage idea, they should seek approval from the board before pursuing it independently. Only if the board decides not to proceed with the idea can the entrepreneur explore other avenues outside the company.
Furthermore, it is important for the member not to participate in voting on matters that present conflicting interests. The business's needs must always come first, prioritizing its success over personal gain. For instance, if the entrepreneur suggests a potential expansion location that is managed by their marital partner, they should disclose the conflict of interest and refrain from voting on the matter. Safeguarding sensitive business information, such as recipes, financial details, and production methods, is also a crucial responsibility. Maintaining confidentiality is essential in protecting the company's competitive edge and ensuring long-term success.
While we are not legal experts and cannot provide legal advice, it is important to note that stakeholders may take legal action against directors or owners if they believe fiduciary responsibilities have not been met. Even if the entrepreneur's decisions lead to business challenges, fulfilling the duties outlined can protect them from legal repercussions.
Corporate decision-making can be challenging. At Brindiamo Group, our members have experienced every stage of the entrepreneurial world. From private to public sectors, our team has the experience to help you no matter where you are in your company journey. For more information on our strategy and advisory services in the adult beverage sector, visit our website.
Article Resource:
Defoe, Brian B. “The Care and Feeding of Stakeholders (How You Meet Your Legal Duties to Your Mother).” Artisan Spirit. Fall 2017: 69 – 72. Print.