If you are running a business with others then a Shareholders Agreement or Partnership Agreement is a must. A Partnership Agreement is required when you are trading as individuals and a Shareholders Agreement when you are trading through a limited company. The hybrid model of an LLP which is common in professional services requires a Members Agreement.
A Shareholders Agreement is used in tandem with the Articles of Association of the Company to specifically manage the way that Shareholders act and the internal processes and governance of the company.
Shareholder Agreements and Partnership Agreements are particularly important if something were to go wrong with the business or disputes were to arise. At this stage those concerned may be at logger-heads and need to find a resolution to the conflict or exit.
For family run businesses sometimes the thought of formalising family arrangements can feel like overkill or in danger of damaging the “family” culture of the business. However, for these businesses Agreements of this nature are probably even more important. Many business matters may not have been properly discussed or understood and the creation of such an Agreement creates an opportunity for discussion and ensuring that difficult family discussions can be aired.
In a Shareholders Agreement or Partnership Agreement important matters to consider are:
- How is the business going to be financed?
- How is the business to be managed?
- What is the profit distribution policy?
- Are the parties working towards a specific exit?
- What will happen to the shares of a party upon death or incapacity?
- What is the procedure to be upon the transfer of shares? Will these be offered to the other parties first?
- How is a party’s interest to be valued?
- What happens if the shareholders cannot agree on a decision?
- What protection does someone with a minority interest in the business have?
In recent years we are also seeing Shareholders Agreement being used in property joint venture deals where typically because of funding a developer and financier may come together to work on a development project and need an Agreement to define responsibilities and profit distribution. We have particular expertise in this form of joint venture agreement.
Whatever business you are in if you are in business with others it makes sense for you to document what you trying to achieve, how you resolve difficulties and what do you do if you fall out. Too often parties fall out or something unforeseen happens and solicitors are called trying to resolve problems without anything in writing.
Attwells have a wide range of experience of producing Shareholders Agreements and Partnership Agreements for a variety of sectors and in particular those in the property and health and social care sectors. Attwells produces fixed fee Shareholders Agreement and Partnership Agreements. If you want to find out more then please contact Nick Attwell for an initial on obligation chat.