This week Advantage Business Angels managing director Neil Mackay weighs up the terrible cost of sin...
I met the owner of a business a month ago. We talked and it emerged that he had spent a considerable sum of money and three years getting his idea off the ground. But for reasons that will become obvious I am not going to name this person or his company.
He had got the technical aspects of his idea sorted out. The business was in a niche market, but a global niche-market.
The entrepreneur had made real progress in the marketing of his idea and had won enough customers to have, at least, proved the concept. I was pretty sure that this was a very exciting opportunity.
I explained our terms and conditions. Naturally, enough he tried to do a deal but we don't do deals - our terms are fixed and everybody is treated the same. So we agreed and he signed on the dotted line.
Next in the process, we took a look at the amount of cash to be raised and considered how best to raise it. We also had to decide on equity or debt, and how many funding stages to go for. We then summarised the position in an Investment Bulletin to be sent to interested investors.
Now, everything was going to plan on this particular company when I had a call from the entrepreneur.
The call was to tell me about an offence he had been convicted of ten years ago. He is still involved in a legal process to have it overturned, but currently it still stands.
As part of our terms and conditions - and it is not hidden in the small print but is very much "in your face" - is a statement requiring entrepreneurs to disclose any material information that might impact on their ability to raise money. Being convicted of an offence, particularly one related to company management, is a material piece of information.
So what do we do now?
One argument says that once a person has been convicted he or she can never be trusted again. Because of the rules on data it is not possible to find out about historic offences in all cases. I do not know the detailed rules - you would need to speak to a specialist lawyer - but unless the person whose background you are investigating is going to work with children or the police then that information is not necessarily available.
So the "honesty" of revealing the information could work against the person.
The other argument is that once a person has "paid their dues" that is it and the record is expunged. Is a person's background and past behaviour an element that should be factored into the decisionmaking process?
The argument that removing past convictions increases the likelihood of a person gaining a meaningful roll in society and therefore reduces the risk of re-offending is a powerful one.
So what did we do? There is a rule based on disclosure.
Investors are entitled to know all material facts before they make an investment decision, so we will publish details of the entrepreneur's past and investors can make up their own minds.