Conducting a business venture with a partner requires careful consideration and legal advice you can trust.
Bringing in a new shareholder to a business can be highly advantageous. In addition to extra capital, the venture can acquire new skills and fresh business contacts.
Well-drafted Shareholder or Partnership Agreements must underpin these relationships. A good corporate lawyer will highlight areas where duties, rights, and responsibilities should be split out and points for you and your partners or fellow shareholders to consider that are often overlooked.
It isn't possible to guarantee that partners will never have differences of opinion over strategy or other areas. Preparing a good Business Partnership or Shareholders’ Agreement can prevent these differences from becoming disagreements or disputes. If a dispute does arise, the agreement can make the resolution simpler, less painful and less costly.
Shareholders have some protection from the Companies Act 2006, and the company’s articles of association provide further ground rules for managing corporate governance and Rights and Duties. But the Act and articles only go so far.
A Shareholders’ Agreement could set out rules on transfers of shares and the creation of new shares. Share transfers can be a source of tension if, for example, one Shareholder wishes to sell all or part of their stake to a third-party unknown to the other Shareowner or owners.
An Agreement can also govern the relationship between majority and minority shareholders. A controlling shareholder could oppress the minority shareholder. Alternatively, the minority could put boundaries on the external activities of the majority shareholder. For example, what would happen if one owner wished to create a competing business?
It may also set out what should happen in the event of the death or retirement of a Shareholder.
The Agreement can also look deeply into the running of the company and the financial arrangement by, for example, governing the payment of dividends, as well as regulating the appointment and removal of directors and setting down what is expected of Shareholders, especially if they are also directors of the company.
It’s important to note that whilst every company is different, various issues often arise that an experienced lawyer can help you to avoid through the early preparation of a Shareholders’ Agreement.
Partnership Agreements set out the rules among two or more partners. While such Agreements do not need to concern themselves with shares, they may cover the distribution of profits and assignment of liability. They could govern procedures for the admission of a new partner, the departure of a partner, or the Dissolution of a Partnership.
Should you consider entering into a simple Partnership, our specialist lawyers would be happy to discuss the pros and cons to ensure that you start your business using the best possible structure.
Get in touch with Jackson Lees
Our knowledge of Corporate and Commercial Law will ensure that sound advice on your business is never far away. Jackson Lees can help you avoid potential legal issues with a new business. We can also help you deal with any problems or Disputes as they occur.
Call us on 0151 282 1700 to talk about your business.