Morenike Okebu, Founder at Reni Legal
If you are an SME owner and you are thinking of taking a loan from a commercial bank, you should read this informative article focusing on the key terms to negotiate. It is necessary to read any legal document before signing it, but reading is not enough, you may have to take things a step further by negotiating the terms to better suit your interest.
One of the documents that most Small to Medium Enterprises (SMEs) will come in contact with is a loan agreement. In many cases, these agreements will come from financial institutions and would be largely non – negotiable. While this is often the case, this is not always the case. Before you get a loan from any commercial institution it is fundamental that you try to negotiate the key terms. Before you sign any legal document, I would always advise that you contact a lawyer; the lawyer should review the agreement and explain to you exactly what you are getting into.
Having said that there are some key terms that you should focus on in any loan agreement.
1. The time frame for repayment: Ensure that you understand and can see clearly spelt out the time frame within which you must repay the amount that you have borrowed. If you have discussed one thing with your bankers, and another thing is reflected in the document, this is a BIG deal. The bankers you negotiated with today may lose their jobs and all your oral assurances may go with them, but you will remain bound by your written agreement.
2. The time frame for demand of late payments: I remember reviewing a loan agreement for a client and the time frame for demanding for late payment was only one week. This was ridiculous, according to the agreement if he missed paying an instalment by one week, the entire sum of money advanced to him would become immediately recoverable and the security he provided would be lost. Ensure you get a fair amount of time. At least a month is reasonable.
3. Waivers of your legal rights: You will find that in many loan agreements, the bank will urge you to waive rights you have under the Conveyancing Act or Property and Conveyancing Law. Kindly consult your lawyer and see how you can waive as few rights as possible.
4. Rights to direct debit unrelated accounts: Watch out for any clauses giving the bank the right to debit accounts that are unrelated to the loan transaction which you or other directors in your company may have in the same bank.
I could write a book about some of the outrageous and unfair clauses included in some of the standard form loan agreements in circulation today. You should obviously pay attention to what happens if you do not timeously repay the loan for example, insurance obligations and so on. Regardless of how desperate you may be for funding, you do not want to do anything that would be counter – productive to your business. Therefore it is important that you negotiate and review your loan agreements properly. If you do it NOW, you will thank me about this later.
If you have questions about loan agreements and how they are reviewed, you can always contact me. An SME owner needs all the legal help they can get to prevent and avoid mistakes and costly litigation.
Morenike Okebu is a qualified Legal Practitioner that graduated from the University of Sheffield at the top of her class. She has several years of experience practicing in leading law firm owned by a Senior Advocate of Nigeria and now is a partner in a law firm GM George – Taylor & Co. which powers her own business, Reni Legal. A law business which focuses on uniquely solving the legal problems facing SMEs and Start-ups. Send an email to [email protected] and she will be in touch.
SMEs: Avoiding the legal pitfalls of giving away goods and services on credit
Image credit: entertainment malawi
A lot of businesses have experienced hard times in the current economic climate. Conversely, the business of some SMEs is booming now more than ever before. The issue I want to write about today is related to managing success and covers some legal issues which come to play when an SME is giving services and goods away on credit.
Giving goods and services away on credit simply means selling goods and services to third parties while they defer payment. It can be an outright deferred payment which can be stated in a contract or receipt or a less obvious form of deferred payment in the form of a post dated cheque. When a business starts accepting transactions like this they are open to a lot of risks and the most notable risk is what if the creditor does not pay?
It is therefore imperative that before an SME gives away goods on credit, the SME fully understands the debt collection process in their country. What remedies would be available if the creditor defaults in payment? The answer to this question differs from country to country but usually the options are:
- Filing a court case against the creditor
- Reporting the creditor to the police
- Reporting the creditor to his professional organisation
When you are thinking of deferring payment, you ought to make amount to be paid on the later date higher than the payment to be made if payment was made instantly: This is because you must ensure that in case payment is not made on the due date, you have charged enough in your deferred payment sum to cover hiring a lawyer to help you get your money back or cover your administrative costs when taking options 2 and 3.
You should also take into consideration the time it would take to exercise any of your debt collection options. Our firm GM George Taylor & Co. specialises in debt collection and we have observed that even in the simplest of cases it can take 1-2 months to recover your money. The question for you SME owner is can you afford an additional delay of 2 months after the deferred date to get your money for the goods you gave away on credit? If the answer is no, then you should not be giving away goods on credit.
Another thing to bear in mind is that where the creditor does not pay, you will need to pay someone to help you get your money back. Apart from any recovery percentage you agree to, you would need to initially pay some money. Can you afford to do that? Before you give away any good or services on credit you need to have this in mind. Only give away sums that you can comfortably afford to recover if need be, the hard way.
Specially drafted contracts by a qualified lawyer will also ease recovering your money if the creditor does not pay. The contracts can create new remedies not listed above which may enable you get your money back faster if the payment is not made at the right date. In summary, even where you are excited for big business as an SME please be careful when giving away goods and services on credit and ensure that you only do so where you can truly afford to do so. Don’t hang your entire business on the promise of a creditor without fully appreciating the debt recovery options available to you. Finally, as I always say, get good legal advice.
Morenike Okebu is the founder of Reni Legal, a law business focused on connecting SMES with high quality legal services they can afford. She is also a partner in GM George Taylor & Co. a full service law firm which specialises in debt recovery. She graduated top of her class at the University of Sheffield and has since then undergone professional training at the University of Southampton, World Intellectual Property Organisation Academy and Harvard University she practiced for years at a tier 1 law firm belonging to an SAN before taking on her current roles..
She hosts free legal awareness seminars for SMES every month. If you would like to attend one of these classes or have any further questions about debt recovery, please send an email to [email protected]
Legal Marketing 101
Vector round web banner of judiciary service. Modern thin line icons in three colors. Big white letter LAW and icons of scales, courthouse, attorney, jury and prison on a black chalkboard(Image: Demoflick)
A lot of practicing lawyers often do not pay attention to the business development aspect of running their firm. Nowadays, It is no longer sufficient to set up a law firm with a small and modest sign board, and then expect clients to somehow find you. It now takes a lot more than that to let clients know you exist and will do an excellent job. As a lawyer, legal marketing entails connecting with your prospective clients on their terms, earning their trust and having them see you as someone who can help them when they need help.
Legal Marketing is a broad term that refers to practices such as client relations, public relations, networking, participation in professional organizations, etc. It generally includes business development activities and efforts to build the brand of your firm and win more clients, thus increasing revenue.
WHAT A LAWYER SHOULD KNOW ABOUT MARKETING
A lawyer doesn’t have to be a sales expert, naturally outgoing, or excessively charming. Instead, growing a law firm starts with a strong marketing plan that uses successful strategies targeted at the right audience and performed consistently. While you may not see results overnight, given time, new clients will be calling up your office. The more transparent your marketing efforts, the clearer it is about the type of cases and clients you want.
Some of the mistakes made in legal marketing include:
- Marketing for general practice
- Not sure of your target clients
- Not paying attention to marketing analytics and results
- Not conveying a clear marketing message
- Poor website design and social media presence
- Trying to do everything at once
- Ignoring the world of mobile technology
Some tips for legal marketing:
- Know your target clients
- Being active on social media is a must!
- Attend bar association events.
- Create a blog for your website and add new content on a regular basis
- Give away free resources in your community to connect with individuals and professionals you may not be able to meet otherwise.
Running a law firm is running a business. Your clients are your customers, and you need customers to remain in business. A lawyer can’t exist without clients and clients can’t find you if they don’t know you are in practice.
Founder Techlawyered | Technology Lawyer | LegalTech Advocate | Software Developer
The Founder’s Quagmire: Finding The Right Share Formula – Morenike Okebu
When you want to start a business, particularly a small one on a small scale, you will be faced with what I call the founder’s quagmire. You will have to decide whether you would own the business alone or whether you will give shares of your business to other people (partners). If you choose to give away shares of your business, you would need to decide how many shares you would give away and the terms upon which you would give them away.
First of all, you need to understand that there are rights attached to shares, particularly voting rights. The fact that you have the most shares in your company does not necessarily mean that you have full control of your company. Therefore, in determining how many shares to give away, you should also narrow down the number of people you give shares to as each shareholder ordinarily has a voting right.
At a company meeting, by virtue of your ordinary shares you are ordinarily entitled to just ONE vote. This means if your company has 4 shareholders with you owning 70% of the shares and the other three persons owning 10% each, there would be 4 members of the company with rights to 4 votes. If a decision you made comes to a vote and the 3 other members of the company vote against you, your decision would not stand.
This is why founders should be reluctant to give away ordinary shares unless they have carefully chosen their partners. Founders should also ensure that they seek legal advice on the appropriate type of shares to give the persons they want to involve in their business. Shareholders agreements are useful in situations like this to ensure that the founder retains a certain level of control over the business and the decision making powers in respect of the company.
It is not necessary that all the shares you wish to give away to potential partners are given to them instantly. There are ways you can set conditions for vesting shares which would require the potential partners to reach milestones before the shares are vested in them. In the alternative, you can create different classes of shares within your business and only award a certain type of shares to the potential partners.
Before you give away shares of your business ask yourself these questions:
- How many shares do I want to give away?
- What type of shares do I want to give away?
- When do I want to give the shares away?
- How much control of my business do I want to retain?
- How many shares do I want to retain for future investors.
These questions will get you off to a good start in determining the correct ‘share formula’ for your business.
Morenike Okebu is a qualified Legal Practitioner that graduated from the University of Sheffield at the top of her class. She has several years of experience practicing in leading law firm owned by a Senior Advocate of Nigeria and now owns her own business which focuses on solving the legal problems facing SMES and Start-ups called Reni Legal.
Email: [email protected]