It is allegedly reported that the Founder and CEO of “Dash” – a Fintech Start-up has been suspended pending an investigation into the operations of the company for financial impropriety. This is a Ghanaian-founded company that raised $32.8 million in equity last year and provides an alternative payment network with connected wallets permitting interactions between mobile money and bank accounts in Africa.
Similarly, the Founder and CEO of “Flutterwave” – Africa’s most valuable unicorn was also reported last year to have been under investigation for financial and personal misconduct pertaining to the running of the pan-Africa Fintech company.
“Dash” and “Flutterwave” are leading examples of Africa’s growing early-stage start-ups with great potential of becoming global brands in the Financial Technology (Fintech) industry. And news of financial impropriety and related misconduct at the highest level of these companies portray the seeming lack of and/or failure of accountability, systems, and procedures that promote best practices in business management.
More importantly, occurrences such as those reported have wider negative implications for the funding and management of other start-ups in Africa and it is imperative such concerns are addressed with pragmatic initiatives that promote good corporate governance in early-stage start-ups.
Therefore, the purpose of this article is to assess the concept and practice of corporate governance as well as offer some guidelines for its promotion in start-ups and small and medium-sized enterprises (SMEs).
CORPORATE GOVERNANCE AND ITS PRACTICE
On incorporation, companies are clothed with the legal personality to carry out their intended objects or purposes. However, the limitation of such legal recognition (artificial personality) implies that human beings must either be appointed and/or employed to steer the affairs of a companywithin a certain framework. Without this, no company will be able to carry out its purpose and operate.
The governance of a company, therefore, requires the effective implementation of arrangements that allow for the seamless management and operation of a company. Toeffectuate the proper governance of a company, officers are expected to comply with mandatory arrangements as required by law and permissible ones which may be considered as best practices depending on the operational requirements of a company.
The prescriptions of structures/organs, functions, and powers under the Companies Act are at best the basic expectation of a corporate governance system that companies can enhance in an attempt to build a good corporate governance one thatpromotes the best interest of a company and seek a balancedinterest of all stakeholders.
To achieve the overarching objective and drive the benefits of good corporate governance, companies must ensure that their compliance with legal and non-legal demands of structures, systems, processes, and procedures are aligned to certain principles including a clear definition of roles, accountability, integrity and ethical leadership, fair and equitable treatment of stakeholders among others.
Therefore, any discussion concerning corporate governance is a call for strict adherence to the mandatory requirements of law and permissible best practices as they relate to the exercise of powers, the establishment of organs/structures, the performance of duties/functions, the institution of systems and procedures for the efficient and effective management of companies.
WAYS OF ENHANCING CORPORATE GOVERNANCE
There is a cost to the effective institutionalization of a good corporate governance system. Apart from its monetary cost, the implementation has the potential to reduce the influence or exercise of power by founders of a company as it imposes strict procedures on how the affairs of a company aremanaged.
Nonetheless, its absence may lead to chaos, mismanagement, improprieties, and breaches of company and corporate management requirements. This may result in sanctions by regulators and create an unsustainable and unattractive operation, especially for funding.
To reduce the tendency of start-ups to suffer the consequences of not instituting good corporate governance systems at theirearly stages, I recommend the following initiatives as must-do to build a strong compliance culture to support corporate governance and its practices.
Rightly, these inefficiencies or lack of capacity reflect in the management of start-ups and result in limited or no adherence to the mandatory and permissible prescriptions on corporate governance. Therefore, a starting point for the promotion of good corporate governance practices will be the building of capacity for start-up founders to understand and appreciate the tenets and practices of corporate governance and be able to drive its implementation across their organizations.
Currently, most start-up founders are unaware of these demands and must be intentional about building their capacities on same as the practice of corporate governance is as important as the development of products or services.
If possible, a dedicated staff should be engaged as a compliance officer to ensure strict compliance with the demands of good corporate governance.
Particularly, clear procedures must be in place for the management of the funds, recruitment of key management personnel, the exercise of key decisions, among others to forestall improprieties that could impair the company’s growth.
We are in a technology era; start-ups must explore the full advantages of technology to comply with demands and promote efficiency and traceability in their operations.
CONCLUSION
There is no “one-size-fits-all” approach to building a great start-up. But there are no great and thriving companies without compliance with rules, procedures, and practices which are underpinned by the demands of good corporate governance. Therefore, as many young people take on the challenges of entrepreneurship and pursue the provision of solutions – products or services across Africa, these founders must understand and appreciate the need to incorporate good corporate governance principles and practices into their operations as part of their early-stage initiatives to promote their sustainable operations. And some of the recommendations in this article must be highly considered.
ABOUT THE AUTHOR
RICHARD NUNEKPEKU is the Managing Partner of SUSTINERI ATTORNEYS PRUC(www.sustineriattorneys.com) a client-centric law firm specializing in transactions, corporate legal services, dispute resolutions, and tax. He also heads the firm’s Start-ups, Fintech, and Innovations Practice division. He welcomes views on this article at richard@sustineriattorneys.com
