Some entrepreneurs are lucky enough to work with others, perhaps family, friends or ex-colleagues, sharing a common goal in a mutually beneficial arrangement. It might seem like there are many more pressing issues to focus on apart from your agreement with your co-shareholders or partners, but I would not agree.
The idea behind a shareholders’ or partnership agreement is not to have a daily reference of how to run the business. It most often stays filed away, until the unforeseen happens and you find yourself in a dispute with your partners. This is when the contract between the business owners becomes most useful.
If developed with expert advice, your partnership or shareholder agreement can protect you against future conflicts. Agreements should cover issues such as appointing and removing directors, borrowing levels and issuing or transferring shares. Crucially, it should limit a shareholder’s or partner’s ability to compete by using the business’s confidential commercial information after they leave and should cover what happens if a shareholder dies or is incapacitated. In fact, it addresses virtually everything that could cause serious conflict in your business in the long-term.
Jonathan Abrams is a Commercial Lawyer at Gregory Abrams Davidson LLP. You can contact him at firstname.lastname@example.org or +44 (0)20 7979 2066.