Who is behind the business?
A guide to using the Companies Office website.

Out walking your dog in the park one day, you get chatting to another dog owner. Eventually, the topic of conversation swings round to franchising. Maybe you are looking at buying a business, or you own a business already that your new acquaintance suggests would be ideal to franchise. Luckily, it turns out that he is just the man to help you and ­offers to assist you with all the documents you need, or introduce you to the right people you need to meet. He is really friendly and seems to know what he’s talking about but, sadly, you end up investing – and losing – a lot of money on his advice. ‘Franchising?’ you tell others, later, ‘What a total con!’

It might sound incredible that anyone would risk their home on the say-so of someone they met in the park, but what if they met at a networking meeting or a chamber of commerce after-five? Does that make them any more experienced? And does it make them so trustworthy that you don’t need to check them out at all? Sadly, in my experience many people, even successful business people, trust their gut instinct too often. When they find out they were ‘had’, they are often too embarrassed – or too impoverished – to publicise the fact.

If you have any business smarts at all, then, before you appoint a consultant or any other advisor, you need to be certain of their credentials before going any further. So where do you start looking for information about a person and their business background? Clue: it’s not their own website.

The Companies Office

A great place to begin is the Companies Office at business.govt.nz/companies. This enables you to search very quickly by company name for the current status of a business registered as a limited liability company (or other types of business such as limited partnerships). Perhaps even more crucially, you can also use the dropdown option to search for individuals as directors and/or shareholders past and present.

If you are searching for a person and a list of businesses comes up, take the time to click on each business and look at its previous history (you can easily return to the list with one click). It is often the case that an entrepreneurial person will have owned a number of businesses through the years and many of them may have been ‘struck off’ the register. Despite its alarmist tone, this may simply mean that the business is no longer trading and has been removed, or it could mean that the business went into liquidation, owing creditors money. Again, unless there are multiple such instances this may not be as alarming as it seems at first glance. To paraphrase Lady Bracknell, ‘To lose one company may be regarded as a misfortune; to lose two looks like carelessness.’ If there is a distinct pattern of companies being struck off, you’ll want to investigate further. Click the link to View Previous Status of any struck-off company to see the period of registration and any time in liquidation before the company was removed.

It also pays to check the Disqualified Directors option – you don’t want to find you are working with someone who is currently banned from a directorship or management role as may be the case if a previous business they owned was liquidated. In fact, the Companies Office site also features a very useful list of current and previous convictions that can reveal anyone who has breached such a ban. This is somewhat buried in the site: to find it, go to the About Us link at the bottom left of the home page, then to the Enforcement tab (to the left), then on the right hand side under Learn More About follow the Investigations and Prosecutions > Results link. A Google search for the name of the person and the word ‘conviction’ may also find this area as the Companies site is now better served by search engines than it previously was.

Shareholdings

Even if a business seems to be above board from a quick glance at its Company Summary, it pays to check each of the tabs for Addresses, Directors, Shareholders and Documents. You can confirm that the address you have been given matches the registered address (may come in handy for debt collection purposes) and confirm who are the directors so you can research the background of any other persons involved in the business. Most importantly, always check the Shareholdings tab. Sometimes other companies are listed as shareholders –  the website offers a link to those companies’ details – and this process may be repeated several times before a person’s name is revealed as the ultimate ‘owner’ of a share in the company you are investigating. A chain of shareholdings can lead to some very interesting finds: imagine, for instance, the potential consequences if one of your competitors turned out to have a 25 percent shareholding in a business you were about to employ as a consulting partner.

Don’t Stop There

Of course, the Companies Office is not the only place to go to check out a potential business partner. You also need to get and take up references, find out their reputation in their industry and Google the names you have found in your researches. If you’re appointing someone as a consultant, talk to others in the franchise sector and a specialist franchise banker or two to find out their reputation. If you’re looking at buying a franchise, you’ll find a whole article on the topic Researching Your Franchisor on this website. There are articles on choosing consultants and advisors here, too.

Whatever you do, don’t just trust your gut instinct. The man you met walking his dog may be honest and fair and a great guy to do business with – or he may be a rogue with a silver tongue. One thing is sure: if he knows anything about franchising, he will encourage you to do your homework as thoroughly as you can before allowing you to spend a cent.

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