Building A Startup Legal Team with Kevin Karuga S02 E03

We unpack what it really takes to leave a stable bank job for a fast-moving tech startup and still make smart career decisions. We also break down why fundraising forces companies to get serious about compliance, governance, people processes, and contract discipline. 
• a candid story of a values-driven interview and a culture built on respect 
• weighing startup risk against bank stability and predictable pay 
• timing a resignation around bonuses while still honoring notice periods 
• why investors demand rigorous due diligence and clean corporate records 
• regulatory compliance for communications and content service providers 
• annual returns, tax remittances, NSSF and NHIF obligations as investor signals 
• board governance basics, conflict of interest disclosure, and keeping minutes 
• building HR frameworks through contracts, handbooks, IP clauses, and discipline 
• fixing scattered agreements with centralized contract management for scale 
Simply search for Impact Masters. Then subscribe, follow, and share www.impactmasters.io.

Transcript

Welcome To Impact Masters

SPEAKER_00 0:00

Welcome to Impact Masters Podcast in collaboration with Africans Talking Retold Podcast, where every conversation sparks new insights. Join us as we delve into the stories of extraordinary individuals who are shaping our world, movers and shakers in tech, policymakers, entrepreneurs, entertainers, and all those whose stories are worth telling. Get ready to be inspired, challenged, and transformed. Welcome and let's embark on this journey of discovery together. You can check us out on all social media platforms. You can also find us across all podcast channels. Simply search for Impact Masters. Then subscribe, follow, and share www.impactmasters.io. Here's your host, Michael Kamanti.

The Interview That Felt Different

SPEAKER_04 0:57

This it it used to be called the Africa Room. So we got into the Africa Room. So Billha just Bill had then walked in. She had just come from the salon. And then he had them cracking a joke. Hey, you see, even Bill had to go to the salon to prepare for to prepare for your interview. Of course it was on a night note. So the people, so Billha was CO, chief commercial officer then. And Gikandi was CEO. Tony was CEO doubled up as a CFO and COO. So I was to I was going to because I had already met Tony. So I was also, I was now going to meet uh Sam and Billha. So we got just the two of us. And they said, oh, let's go and have a chat. That's how they called it. And Mimi, I'm here prepared.

SPEAKER_01 1:45

With all your papers.

SPEAKER_04 1:46

With all the sections on the company's act, on everything.

SPEAKER_01 1:50

But surprisingly. Did you carry the briefcase that the lawyers carry around? I think that I did not carry it. Okay.

SPEAKER_04 1:56

But I may have had some papers. But let me tell you have you seen humility personified? Bilha and Sam in that interview room. I could tell that I could I knew that these were highly accomplished people. Ivy League, uh people who have worked for big organizations, people who have now started a company like this that has grown this far. And uh you could tell they respect you even as you engage with them. And I there was a breath of fresh air, and it was not an interview per se. It was actually what they said. So they needed to know uh who I am, what I have been doing, have I known about Africa is talking? What can I, how can I come and help? Because they told me that they were in the middle of a fundraising exercise. And they really needed to start a legal department because uh uh within the organization they had they had a lot of paperwork that needed to be reviewed. Yeah, they had uh partner agreements, contracts, and now the investors had come, there was a lot of documentation that needed to be reviewed. Yes, and everybody actually in the office was a lawyer. I remember talking to Wiza and uh Grayson Jay here, and it looks like they were quote unquote the resident lawyers because they are the ones who used to review a lot of and write all those agreements on the fly. Yeah, and so they the the real need these people had was are you able to show up? Are you able to come and join us? And uh, you know because here working is not when it's not uh eight to five, yes, is when you are at the right structure of mind, that's when you do the work, at the right frame of mind, and they and and there's something that was very profound that uh uh that some said, and he kept saying it after that the desire is for people who work at Africa is talking to be decent human beings, all right? To treat each other with dignity and respect, the same way you would want to be treated somewhere else. Absolutely, and I loved the philosophy.

SPEAKER_01 4:13

I had uh that's what sold you out.

SPEAKER_04 4:15

Yeah, I loved it. The fact that you could, you know, I could see it was an open space. People are in the office, it's an open open space. In fact, if you walked randomly into AT and you are told, okay, pick who is the CEO. In fact, that day I people someone would have picked me because I was I was of a dress.

SPEAKER_01 4:31

You looked more decent than anyone else.

SPEAKER_04 4:33

I I looked uh um I looked the part, so you'd say I was a boss. So, but if you randomly, even today, yes, if you run, unless you know the team, yes, if you're put in Africa something today and you are told, yeah, okay, tell me. Pick who is who who is the pick who is in leadership and who is who is the boss. Yes, you never you can't, you can't because genuinely you cannot, because there was that uh aspect of uh you know being treated equally and treated with respect. You are playing the same football table, you are go there. Was no special cup for the CEO. There was no special spoon for the CEO. Everybody you pick one, and there was no the CEO is going to do it first. No, it was open, you know, and uh there's a word that he kept saying, you know, we are scrappy, you know, we are bootstrapping, yeah. We just want to, you know, we are trying this and that.

Choosing Risk Over Bank Stability

SPEAKER_04 5:26

So that is that was how I I came, but now I had second thoughts. I like the place, but might these guys afford the salary?

SPEAKER_01 5:37

They look broke.

SPEAKER_04 5:38

Now these guys, I don't know, I'm not sure. When I look at the bank, you know, the bank is very stable. I know I am the money is flowing, money is flowing always. There's a the structures, they are bonuses, they are bonuses. I had never been ahead of Lego. In fact, in my team, I was a junior most at Stanbeck. Yes, because despite having been given promotions, yes, I was still the junior most in my team because remember, there was a top boss who was a company secretary, and then there was the legal manager who reported into the company secretary, and then there was a legal officer who reported into the legal manager. And so as a legal assistant, I quote unquote reported into not the legal officer, the legal manager, but through the legal officer.

SPEAKER_01 6:24

So I was basically the junior most.

SPEAKER_04 6:27

I was a junior most. And even in the legal department as well, I was the junior most. Yes, I was just a legal legal assistant. So before I became a legal officer, so I looked at this was going to be a very big mountain. These guys are telling me to come and start a legal department. Yes. How do people start legal departments?

SPEAKER_01 6:45

Did you consult consult your uh your your guys there or how did it go? I had never started a uh a legal department.

SPEAKER_04 6:52

So I spoke to my head of Lego, yes, uh Elliud Ogutu and also talked to Otonglo. He remember I mentioned Otonglo quite a bit. I think I I may have spoken to Kanyarati, I can't remember. He but I asked, but I remember Elliud really breaking it down. How do you start a Lego department? What does it entail? And surprisingly, they were happy for me. Oh, you might be getting an opportunity, but what I did not want to tell them is I'm not sure if these guys can fish.

SPEAKER_01 7:28

I'm not sure. You guys did not discuss anything to do with the payment. We we discussed, but they said there's no problem.

SPEAKER_04 7:35

You just come and just come, you you just come.

SPEAKER_01 7:38

You see, and it's a one you know, most interviews sometimes take months. Yes, it is just a chat conversation, and they're like, ah, you are good.

SPEAKER_04 7:46

And you know, they asked me when would when are you available to start? Even if it's tomorrow, please join us because they said there's a lot of work to be done, so I weighed my options.

Bonus Timing And Giving Proper Notice

SPEAKER_04 7:58

Uh I had maybe I I felt like uh maybe I needed to move. And honestly, I was at that stage of my career where because I had been with Stanbeak for a while, I had learned a lot, and maybe I may have wanted now to move. Because I remember during that time when I was at Stanbeak, I had been applying for a lot of other jobs, yeah, yeah, just for you know and also you got your master's, so you feel like you need to grow. So you feel you want to grow. I remember I applied for so many jobs at that time, and uh I think I was I felt like Tony gave me a lot of confidence because uh Tony was the first person I had met, and Tony explained to me what the company is about, and of course, you could tell you know, Tony is a serious character, he's not a guy who's who would be joking, and also speaking to these guys, and now also hearing that they were actually fundraising, and it was even in the newspapers, so they had gotten money, they they were it was reported that they had gotten money, they had the money had not yet come, yes, but they had actually uh gotten to that point where they it was known for sure that investors are going to be coming, so money was going to come. So I made my decision and decided, okay, I'm going to give my notice at the bank. Ordinarily we give one month notice. Yes. But then I told the team, you know, March is usually bonus at the bank. So, and if I which month was it? This was uh maybe January. This no, this was this may have been February. Yes. I told them January or February, I told them uh please allow me to collect my bonus first. So you told the T team that yes, I told them I'm available, but if I resign now, I may miss out on my bonus. Yes, that comes out in March of every year. Yes. So after I the day I got my bonus, I resigned. I gave in my one month. One month. After I had gotten my bonus, yes, because I was very scared. I'm not sure. These other guys, I'm not sure they would have done that, but I was very scared if I resigned before the bonus is out. Would they even might they reverse it? So I I waited for bonus, bonus came, I resigned.

SPEAKER_01 10:12

But ordinarily, if even if you resigned, do you still get the bonus or you don't?

SPEAKER_04 10:17

No, I I will not speak to that because I I to be honest, I may not know because for you took the safest uh uh route.

SPEAKER_01 10:26

But even you as an employer, if someone tells you they are leaving, you never call someone for money, bro.

SPEAKER_04 10:32

Are you going to and you had promised to give them 20 million? Yes, do you think you're going to give them that bonus? Of course not. You might just play a bit of PR and give them something small. So I just decided to keep quiet. And uh I had done my time, but then I gave my notice, of course. I always I always feel it's very important, and this advice also to young people and everybody. Whenever you go to an organization, don't just up and leave. You have to ensure that you you honor your contract because usually, even in under the law, you at least need to give your employer some time. Some time. At least one month notice. Yes. And uh, you know, it's it's important. And employers should also understand that people also need to grow. So uh people don't just stay in their the same jobs. Don't expect people who, if you are a boss, don't expect people who work under you are always going to be under you until Christ comes. It is important to allow them to grow, support them to grow. That's why I was very happy when I told someone like Eli Dogutu or someone like Anyarati and Otonglo that I was going to move and they encouraged me and they were happy for me. Oh, that is very good. I would be, oh, is there anything you would like us to do? How can we support? How can we support? In fact, a lot of times even uh Otonglo used to write for me recommendation letters, and that was a spirit. So I felt, and the reason why I'm able even to mention those people today is because they supported me and they were not, they did not block my path. And I would do the same. Dave, people who work with me, if someone gets a better job, a better place, you know, in you always need to.

SPEAKER_01 12:10

And they're open about it.

SPEAKER_04 12:11

You're open about it, it's always good to allow people to grow. Yes, so that's how I joined Africa

Joining Africa’s Talking During Growth

SPEAKER_04 12:16

is talking.

SPEAKER_01 12:16

Wow, interesting. I have been waiting to get here because there's a lot of meat to be dissected at Africa's talking, and one of those things is that that point Africa stocking was growing rapidly, if I may say so. Yeah, at this point, they were in how many countries?

SPEAKER_04 12:33

Uh they were in uh I think five. There was in Kenya, Uganda, Tanzania, Nigeria, Malawi, Malawi.

SPEAKER_01 12:41

Yes, and uh because they say there's a lot of work to be done, of course. A lot of work. The day I joined why was that important to be legally abiding? Because, of course, I know that's how you can confirm. It's one of the requirements that people who are giving you money to see that you are legally established. Yes, what you say checks up. Yes, because you see, when you go to raise money, you just uh present some slides, yes, and people are happy with what they see, and they see the projections and they are they do their due diligence, but they want to confirm legally. But how does how did that process look like and why is it important?

SPEAKER_04 13:19

It's

Fundraising Due Diligence And Compliance

SPEAKER_04 13:20

very, very important to ensure that you are compliant because you don't operate uh in utopia, you operate within uh legal structures. And if I may specifically talk about Africa is talking, Africa is talking is a content service provider, yes, and we are regulated, highly, highly regulated, yes, yes, and so in Kenya we are regulated by the communications authority, all right? And in other countries, of course, we have different regulators, so we work within the space of a regulatory framework. So we don't just rock up and say we are selling SMSs, we have specific regulatory requirements by the communication authority, all right? So that is number one. Yes, number two, uh we were just receiving funding. Yes. And when you're receiving funding, there's something you mentioned called due diligence. Due diligence is rigorous, and that due diligence, in fact, started in 2017. When uh before you joined it. Before I joined. Because what happens, anybody who wants to give you money as an investor, you want to understand who are these people. Are they first of all, are they registered? Or is it uh a briefcase company? Company that someone is just uh coming to say we need money. So it's very important for the world to show that you are a registered entity, you're not uh a one-man show, it's not a one-man shop. So you're registered? Who are the shareholders of this company? All right, yes. Have you guys been making any profit? What are your revenue flows like? What are your financials? Have you been audited before? Have you been paying your taxes? So those are very important aspects. So the reason why you need a legal a legal team or a legal department is to give you assurance, number one. Yes, you are registered as a company. Yes, we are registered as Africa Stalking. Yes, by uh the registrar of companies. Yes, it does not end there. Yes, you need to ensure number one, you file annual returns of that company. Yes, and annual returns are paid, I mean, filed and lodged every year. Okay, and annual returns are basically the returns that talk about who are your directors, who are your shareholders, what is your share capital, do you have any debt obligations that you're servicing? All right, so that whenever someone goes and you've heard the word CR12 being thrown around. So the CR12, when you go and ask for a CR12 for Africa is talking, when you print it out, it's going to tell you who are the shareholders of that company, when was that company incorporated? What is the registered office? Things like that. Yeah. So it is going to be very important to ensure that apart from being registered, you're compliant. Number two, we have our big brother called the Kenya Revenue Authority. Have you been remitting taxes? Because as an entity, you are registered for income tax. Yes. You're registered for VAT. Yes. All right? Yes. Now you are also registered for withholding VAT. Have you been remitting? That's number two. Yes. Number three, you have employees. Yes. And these employees, you have to remit their contributions to NSSF, to NHIF. Alright? Are you compliant?

SPEAKER_01 16:45

Or are you in debt?

SPEAKER_04 16:46

Are you in debt? With the government. With the government. So it's going to be very, very important. So that the person who's coming to give you money understands.

SPEAKER_01 16:52

Their money is not being spent to clean your mess. Or even if it's used to clean your mess, they are sure it will come back.

SPEAKER_04 16:59

They are sure. They understand what that means for us. Yes. So apart from ensuring that we are registered, number two, I said we are regulated. So you need to understand the communication authority of Kenya has given you a license. But for you, like now we have a usually they give you a 15-year license. Okay. But it does not mean that now you go home and sleep. You have to get compliance certificates every year. And how do you get compliance certificates? You get a compliance certificate by ensuring that you are compliant with the quarterly returns that we need to file with the regulator with the with the with the regulator. So the regulator comes and tells us this is what we need. They have given us guidelines. This is what you need to fulfill. And can you tell us every quarter? Have you fulfilled? Have you fulfilled that? Number three, we need to understand who runs the company.

Governance, Boards, And Conflict Disclosure

SPEAKER_04 17:57

Does the company have a board? Has the board sat? Can we see that the resolutions the board has passed? Do you have a budget? Has the board been approving the budget? Has the board been uh looking at the financials? How is the board constituted? Is it balanced? Is it balanced?

SPEAKER_01 18:16

Or is it your relatives? Yes, or uh, is it all your relatives who you have brought? So is there a problem with that though? I just say that without thinking.

SPEAKER_04 18:26

Well, yes and no. You need if you are bringing relatives who are qualified, who are qualified, number one, yeah, you need to declare what is called a conflict of interest.

SPEAKER_01 18:35

Ah, so some decisions might be made.

SPEAKER_04 18:39

In a governance standpoint, if you're my brother and I've brought you into my board, I need to make full disclosure to the board and the shareholders. Okay. And that brother does not just need to be brought uh on the front door, you have to just be in agreement, it has to be also be a competitive uh process. Okay, so you got appointed on merit, not because by blood, not because so and so and so, yeah, you know, yes, and and that's why I digress a bit. I was very there's something I have uh liked about, and allow me to just mention the name. The president, one of the president's daughters works at foreign affairs, yes, and uh I have uh I've followed a I'm I'm forgetting the name. Uh I think it's the one in Belgium, could be June. She works for the Ministry of Foreign Affairs, and I remember there's one time uh I think she joined the defense college as uh a group from from the different uh government agencies, yeah, went for I think a one-year uh course. There's something I've admired. I don't know her personally, but I think there is a deliberate effort of actually becoming highly qualified. Yes, in that line of diplomacy, in that line of foreign affairs. From her. From her, right? So the day that June Ruto becomes an ambassador may not become an ambassador because the father is a president, but it's because that's what she wants to pursue. That's how qualified she is. I was reading about uh Ian Kagame the other day, and Ian Kagame is uh one of the bodyguards to the president to the senior uh bodyguard to his father.

SPEAKER_01 20:25

But Ian Kagame has uh attended the best military schools, best military academies.

SPEAKER_04 20:33

I was also, of course, controversial. Uh uh when you look across our neighbors in Uganda. Yes.

SPEAKER_01 20:39

The MK there.

SPEAKER_04 20:41

Yes, Mohosi. Yes, Mohzi is uh head of the military. But he was not just putting a decorated soldier. He's a decorated soldier. You can see when from when he joined the the the for the the the service, he has gone, of course, to the best, uh he's been to Sandas to whatever, whatever, he's been to the best military academies. And even if you can you can you can say maybe someone is being groomed, there was a process to it. All right? Yes. So as I said, I digress sometimes. Yes. So you find that even if you are bringing on someone who is related to you, it's important for them to be qualified. Yes. So the the reason why it was very important to have Lego is now it is it is not enough to have a board. It is not enough to have a company registered. There are things that how is that company run? So there are things that are called internal frameworks, internal policy frameworks. So when you talk about the board of directors, who is on the board? How are they appointed? What decisions do they make, and how do they make? And do they have minutes that you can refer to? Can you show that? Oh, you know, we were having this, this is how this is what was deliberated by the board. This was the decision that was made by the board. Yes, because a board has. Not just meet in a Karumindoba and they say we are going to do ABCD. A board meets in board meetings. Yes. Okay? Yes. And the secretary takes minutes. So that 10 years from today, when they ask, can you bring me the resolution that said ABCD? And I saw that with my boss at Stanby. Lilian Bindio was pick and span in terms of record keeping. We had a safe where you could go and get minute books from the 1960s. Which is well guarded. Yes. If you needed a decision that was made by the board in 1974, you went and checked.

SPEAKER_01 22:37

Which was under to why I assume.

SPEAKER_04 22:39

Yes, of course. Now of course that's what happens. Because now the role of the company is to keep company records. Right? Yes. So you are able, even today, if you if you come to me today and ask me, hey, can you show me the board minutes of the board that uh met in 2018? I'll bring them out and say, This is what was decided. So every decision that is made needs to be recorded. Yes. But my point was when you are starting a legal department, or when you're in a company, you need to, you need someone or a department to help you streamline processes. Because you remember there's what is called risk. Yes. There's going to be a lot of risk. You have legal risk, you have regulatory risk, operational risk, you know, financial risk. Yes. So you have to ensure that you understand how do we manage risk, all right? Within the company. Yes. How do we ensure we have processes in this company? All right? And processes begin at the top. So there's something that is called a board mandate or a board charter. This is the document that now outlines who is the board, what is the role of the board, how is the board constituted, how is the board uh, you know, how does it make its decisions? Yeah. What is the power of the board?

SPEAKER_03 23:55

Yeah.

SPEAKER_04 23:56

All right? Yes. So with the board charter, we have uh the board charter of the board mandates. Now we have delegated authority. Because now I told you the board is the one that runs the company, yes, but it delegates its authority to management.

SPEAKER_02 24:14

Yes.

SPEAKER_04 24:15

Alright?

SPEAKER_02 24:15

Yes.

SPEAKER_04 24:16

Because now we will have the board, the entire board is not going to be signing checks or approving payments.

SPEAKER_02 24:20

Yes.

SPEAKER_04 24:21

So we have what is called delegated authority. Yes. From the board to members of management who are running day to day. Who are running day-to-day. Okay? So what is the process of doing that? There is also a very important resource in an organization called the human capital. The

Hiring, IP, Contracts, And Scaling Laws

SPEAKER_04 24:41

employees. Employees, I mean the company cannot run without employees. Yes. Even if you go to the funding, you have to have a proper structure. So, how do you hire your employees? What is the process? So you need to understand when you're hiring employees, you need to give them employment contracts. All right?

SPEAKER_01 25:01

Which is drafted by the legal.

SPEAKER_04 25:03

Yes. And those employment contracts need to be very clear on the mandate. On the mandate of the employee. Yes. If you need to fire that employee, how do you fire them? And what reasons would you have?

SPEAKER_01 25:14

That process of firing also is supposed to be legally abiding.

SPEAKER_04 25:18

Properly. If you are if I brought you in as an engineer and you are creating intellectual property, I need to tell you that that is not that is not your intellectual property. It is the company's intellectual property. It has to be on the dotted line, all right? You have to understand if we have a dispute, how do we going to go through it?

SPEAKER_01 25:36

The resolution, yeah.

SPEAKER_04 25:37

That is why we also have the employment uh contract is read together with an employment handbook. An unemployment handbook is the Bible for the employee to understand. There are different policies in this company. We have a sexual harassment policy, we have uh a sick leave policy, you know, all those policies are outlined in uh what is called a student handbook.

SPEAKER_01 26:02

So the company handbook.

SPEAKER_04 26:03

Yes, it's called the employee handbook. Okay, so uh the employment contract needs to make reference to the employee handbook. Yes, because they are in them, they work together. Yes. So you go checking, all right? Yes, but then there are also processes now under human capital. How do you what do you do? How do you conduct disciplinary hearings, things like that?

SPEAKER_02 26:25

Yes.

SPEAKER_04 26:25

All right? Yes. So all those things needed to be to be properly outlined. Yes. The other thing that was very, very important is to ensure that because now we are bringing investors, can you review agreements and say there's a shareholder agreement that we are signing? Is it good to go? Or is it not good to go? The other thing is ordinarily as a company, when you're doing business, you have contracts with the suppliers, with the partners, users, with users. It is very important to ensure that it is legally sound. That we get in, maybe we have uh a contract. Because I remember those days, I think those contracts had been just drafted in the in the office. And when we started reviewing them, oh it was it was just a you know engineers uh they're not good with documentations, it was not good, and then we you also need a one point of call because contracts were with everybody, everybody had a contract. This contract was signed, it was it is not in a central place. Okay, but then when you when you have a team dedicated, it is very easy to know we have signed a contract with Safaricom. This it is in this folder, or this is how this is where we uh we can retrieve it from. We have uh a contract with this applier. So if Jaroge has one and Obondi has another, and the Kibet has another, then all of them are uh scattered. So those are among the main reasons why a legal department was required. Was required.

SPEAKER_01 27:56

Yes. Now, uh Kevin, so so at this point you're in five countries, and I know these countries actually have different constitutions, different legal frameworks, and so on and so forth. And I know at this point, one of the key metrics of raising funds is to scale. Uh, it always comes up, always. So, of course, there was a scaling factor of it, and yeah, you're dealing with different legal you know frameworks. Yeah, was that a big challenge for you to really now, given you're used to Kenyan law, yeah, uh to be able now to figure out okay, how do we do this now in Malawi, in South Africa, in you know all these countries that we are in?