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When starting a business relationship – Make sure the rules are in place

With the excitement of commencing a new business a Shareholders Agreement/Partnership Agreement is sometimes forgotten.

A Shareholders/Partnership Agreement:

  1. Sets rules and parameters to assist with the management and operation of the business and the relationship of the parties;
  2. Covers funding, structure, management, direction of the business; and
  3. Outlines the responsibilities and obligations of the business owners.

It is the best time at the start of such an arrangement for the parties to invest in putting an agreement in place because despite everybody’s best intentions, sometimes business relationships fail and if that failure is spectacular, it is best that the parameters are known at an early stage.

However, every Shareholder/Partnership Agreement is different depending upon the business and the individuals.

Common features of a Shareholders/Partnership Agreement are the following:

  1. Admitting or terminating partners/directors/shareholders;
  2. Decision making;
  3. Decisions requiring the unanimous resolution;
  4. Frequency of meetings;
  5. Expectations upon partners/director;
  6. Dividends/drawing policy;
  7. Consequences in the event of death or permanent disability of a partner/director;
  8. Determining goodwill calculations on entry and exit;
  9. Restraint requirements;
  10. Retirement considerations;
  11. Leave entitlements;
  12. When automatic expulsion may apply;
  13. Selling or winding up a business.

We can provide assist with drafting, amendment or reviewing Shareholders Agreements or assisting with the resolution of dispute between shareholders and/or directors.

If you would like assistance, please contact us for an appointment.

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