S.Mutaga III wrote:My friend and I are thinking of starting a small company where we will own some shares and seek other people to invest in the company and in return, they will get shares too according to their contribution. In addition, we intend to run it as a holding company whose sole purpose is to invest in other companies. Since investing in stocks both at nse and in the OTC market is largely passive, we will just have a small office for a start. After receiving the cash from the investors, we will invest the cash and charge a 2% management fee and a 20% performance fee on all profits after tax. 10% will be kept as cash reserves for the company and the rest distributed as dividends to shareholders. Is this kind of business allowed in Kenya? What are the requirements? Some guys showed some interest in investing with us and we coined the idea.
Great idea...but wait...the devil's in the detail...let's take a look...
1. So will you be the major shareholders and thus main contributors to this company?
2. How long, if ever, have you worked with this friend?
3. The investors shall thus be passive. What's your track record in this private equity sort of business? Why should I, for instance, believe in you(r) (company)?? On a side note though, good picks in the 2014 thread...
4. So there will be no salaries for you both and remuneration only based on performance? What's plan B if a terrible financial year comes by for these subsidiaries/ associate firms?
5. Only a 10% cash retention policy...heh, even if you want to entice investors with high returns...keep some (more) Kshs. for other investments...and a bad day is always somehow around the corner...as of writing this two days ago, Berkshire Hathaway reported their H1Y14 earnings with 55 Billion USD in cash balances...looking for acquistions...
6. Finally, are you looking to invest in existing enterprises, startups, acquistions etc etc...each has its level of stability and return...investors need finer detail (I believe even potential ones here on Wazua)...
Well, as a sort of PE fund or Company read more on Kenya's first indigenous firm...Ascent or Ascend Capital (either not too sure, might be confusing the phone and fund's names!)
Ze best...!
I went into the (Ferry) industry knowing the same thing I knew with all other businesses I went into- Nothing. Then I built it from there. - Sheldon Adelson (Titans at the Table- Giants of Macau)