WhatIs a Founder’s Agreement? Describe the Purpose of a Buyback Clauseand Why it Is Importance.
Afounder’s agreement is a written document that contains specificinformation regarding the rights and obligations of each foundingmember and the organization`s business plan (Barringer & Ireland,2012). Regardless of the nature of the relationship between thefounders of an organization, it is crucial that they draft a writtenagreement that stipulates the responsibilities, duties,contributions, and proportional benefits of each of them. Conflictis one of the causes of business failure hence a founder’sagreement prevent situations where an enterprise can be closed downbecause of disagreements that the entrepreneurs should have foreseen(Barringer & Ireland, 2012).
Onthe other hand, the buyback clause stipulates the actions that mustbe taken in case of a demise of one of the founders (Barringer &Ireland, 2012). It also offers guidance on what happens when one ofthe founder members wants to leave the enterprise. Besides, thebuyback clause facilitates the purchasing of the shares owned by themember who decides to leave by those who remain. Additionally, itprotects an enterprise from a situation where the shares thatbelonged to the dead founder or those who decided to leave are boughtby strangers (Barringer & Ireland, 2012).
Listand Explain Four Steps Entrepreneurs Can Take to Avoid LegalDisputes.
Legalbattles are expensive to an organization since they reduce profitsand damage its reputation. First, an organization should establish aproper communications channel for conveying messages to employees,customers, and suppliers. Most of the times, litigation arise as aresult of misunderstandings. An organization needs to be clear onwhat it means and move with speed to address any misunderstandingthat may result in one or more of its stakeholders suing it.Secondly, an enterprise should fulfill all of its contractualobligations. Every organization has a set of obligations towards itsemployees, customers, suppliers, and government.Thirdly, anorganization should ensure that every agreement between it and itsvarious stakeholders exist in written form. This is the easiest wayto avoid legal battles since the management can check its record incase of any disagreement. Lastly, an organization can avoidlitigation if it undertakes to set standards that inform all theworkers of what is expected of them in any situation (Barringer &Ireland, 2012).
Listand Briefly Describe Three Specific Steps that an EntrepreneurialOrganization Can Take to Build a Strong Ethical Culture
Firstly,the top management of an organization needs to lead by example. Thecliché that says “action speaks louder than words” best explainsthis points. Workers are likely to act ethically if they deem the topmanagers as good role models(Keith, 2015).The second step is the establishment of a code of conduct. Accordingto Barringer and Ireland (2012), a code of conduct is a formaldocument that stipulates the organization’s position regardingcertain actions and behaviors. Thirdly, an organization shouldinitiate an ethics training program. An organization should ensurethat booklets containing the company values are placed in strategicpositions that all workers can access with much ease(Keith, 2015).
WhatIs Meant by the Term “Piercing the Corporate Veil”? How Can theCorporate Veil Be Pierced?
“Piercingthe corporate veil" is a phrase used in courts to refer to asituation where the owners of a private company are forced to makepayments for debts accrued by their business. Ordinarily, owners of acorporation cannot be forced to pay for its debts upon its closure.However, a court upon listening to the case filed against acorporation may issue a directive requiring that its shareholders,members, directors and officials pay its debts or have their personalproperty auctioned to compensate the creditors for their losses(Legal information Institute, 2016).
Inconclusion, the shareholder’s agreement prevents a situation whereconflict arises between founders on issues such as the sharing of theproceeds and liabilities.
Barringer,B., & Ireland, R. (2012). :Successfully Launching New Ventures.Pearson Education, Inc.
Keith,D. (2015). Article: Waysto build strong ethical cultures. Accessed on April 9, 2017,http://deloitte.wsj.com/riskandcompliance/2015/04/06/ways-to-build-stronger-ethical-cultures/
Legalinformation Institute. (2016). Piercing the corporate veil. Accessedon April 9, 2017,https://www.law.cornell.edu/wex/piercing_the_corporate_veil
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