Continuing with our series on the Due Diligence to be conducted before investing in agricultural projects, if you are satisfied as to the existence and track record of the business, then conduct a legal due diligence.
Find out if the business is registered and how it is registered.
Get advice on what the registration form means to you the investor.
For example, what are the implications of investing in a limited liability company versus a sole proprietorship?
What assets does the business have and can these adequately secure your investment in case the business does not deliver the promised returns?
What do you need to do so that the assets secure your investment?
Remember, agriculture is a risky venture, animals fall sick and die despite the best animal husbandry practices.
What are the contract terms? Are the contract terms enforceable? For example, Capital Chicken described itself as a partnership and so investors were partners in the business.
But were the investors truly partners? Did they have a say in the management of Capital Chicken? Did they know anything about the operations of Capital Chicken?
Do not be deceived by the title given to you when you invest. Look into the structure and determine whether it is real.
What recourse do you have if the venture does not work out and your return on investment is not paid? Are the business proprietors willing to give personal guarantees secured by some assets?
The due diligence may seem expensive and over exaggerated given the amount of money you are willing to invest. But remember, most scams bank on your repeated investment. They are structured to make sure that you continue investing your principal and capital earnings or interest. This makes the amounts invested more substantial.
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