Legale Overseas n. 235 ― Corporate planning spares the partners from dealing with conflicts through internal disputes ― most of the times with irreparable consequences ― that could’ve been avoided if the rules of the game were clearly defined, before the game started, regardless of the business size.
By Mariana Fiorio.
Forming or restructure a company without a corporate plan is like participating in a game with half of the rules established and leave the rest to negotiate during the game, in between of disputes, crises, and conflicts. This is what our experience has shown us in more than 20 years of Legal Support to branches and foreigner subsidiaries installed in the country, not to mention the Brazilian family-owned companies installed in Brazil and abroad.
It takes more than a well-drafted articles of incorporation or bylaws to make an enterprise sustainable, even when things are going very well, and the results are positive. Unfortunately, it’s not rare that some organizations go through their biggest internal crises just when the financial results are coming in.
What most business leaders and entrepreneurial families ignore is that corporate planning goes far beyond a document covering the legal and accounting procedures to be performed by each of the partners of a company. Corporate planning focuses on the process of defining strategies, operations, and results, in addition establishing norms and rules relevant to the business.
To make it clear: its goal surpasses the limits of bureaucracy; it’s an act that aims, mainly, on the protection of the Partners of a company regarding the integrity of their assets and personal finances. Besides that, it defines the right, obligations, and tasks that each partner will have within the company, acting as an excellent tool on the combat internal conflicts, being able to establish the prior resolution of certain issues with the potential to result in litigation.
Among the main rolls of corporate planning are the definition of each partner’s responsibilities, the choice of the adequate corporate type, articulated with the tax model, the administration and management rules, the partners’ entrance and exit rules, the succession planning (almost always neglected), considering the largest possible number of factors at play and scenarios, regarding such sensitive topics: dividends, profit distribution, consistent growth, corporate and personal assets, etc.
The lack of structured planning can lead to significant losses, bad financial results, patrimonial confusion, greater chances of judicialization to solve problems, unnecessary expenses, and the lack of preparation, forecasting and anticipation of the most diverse situations, such as, for example, the death of one of the partners or the company’s bankruptcy.
In one phrase, corporate planning spares the partners from dealing with conflicts through internal disputes ― most of the times with irreparable consequences ― that could’ve been avoided if the rules of the game were clearly defined, before the game started, regardless of the business size.
When is the most opportune time to do so?
Corporate planning usually is made before the formal opening of a company. But it doesn’t mean that, along the way, the model can’t be improved or reviewed. The point is that, when it comes to business, finance, and financial security, acting on inertia, counting on luck or the stability of personal relationships can be reckless.
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