Business Owner Agreements
(Shareholder and Partnership Agreements)
A Co-founder Agreement is a contract between Co-founders setting out the ownership, initial investments and responsibilities of each founder. Co-founder Agreements are commonly referred to a shareholder or partnership agreements depending on your business entity.
There is nothing more important than having a clear agreement between the founders (and owners) addressing key issues that are critical to your ability to safeguard the future of your new (or existing) business.
The key issues that any agreement must include are the roles and responsibilities of the founding team, equity ownership and vesting and IP ownership.
Our team of commercial lawyers offer highly experienced bespoke legal advice to suit your needs.
Shareholder Agreement (for Limited Company) – What it is, and why it’s important to have one?
A shareholders’ agreement is an agreement between all the shareholders of a company. It is a vital document to any shareholder relationship which allows shareholders to regulate their relationship with one another, the company itself and its directors.
It is important to ensure that a company’s structure is carefully considered so that management and shareholder roles are identified, clearly set out and observed to. Shareholders do not have any duties or obligations to a company or its business under law. If a company has 2 or more shareholders it is sensible, arguable essential, to enter into a shareholder agreement setting out the rules and regulations upon which the shareholders, the company and its directors are to be bound by.
Shareholders’ agreements ensure all parties will have a better understanding of their rights and obligations. The obligations will lay down how the parties must act or behave in their operation/management of the business and others will be restrictions on what they can, or cannot, do without appropriate approvals and consent from the other parties be it other shareholders or the board.
As with any business a company can go through many changes and ownership through its life cycle. It is not uncommon for shareholders to fail to agree on matters, resulting in ‘deadlock’, or a fall out completely between the owners. In such circumstances, the shareholders’ agreement will define the correct exit route for the circumstance so that the company and its business are not jeopardised.
You should enter into a Shareholders’ Agreement if…
- your business has two or more shareholders;
- you are setting up a new company or starting a new business;
- you are buying a business with others;
- you are acquiring shares in an existing trading company;
- you are selling shares or transferring shares to others in your company, whilst retaining a shareholding.
If you have already established your business, it is not too late to put the protections in place, and ensure that shareholders are protected in the future. You can enter into a shareholder agreement at any time not just when you set up a company!
Remember as with any agreement, terms or contract – review it regularly. A document that was a ‘good fit’ years ago, may not be good now – ensure that they remain suitable and relevant
Partnership Agreement (for Partnerships and Limited Liability Partnerships/LLP): What it is and why it’s important to have one?
A Partnership Agreement sets out the rights, responsibilities and obligations of the partners who have entered into business together. It is a formal agreement between the partners during the existence of the partnership and also upon its dissolution.
There is no legal requirement to have a formal or written partnership agreement. There are some compelling reasons for having a written partnership agreement, these include:
A written agreement will ensure that the financial interests of partners are formally recorded.
If you don’t have a formal partnership agreement then the default provisions of The Partnership Act 1890 will apply which may not suit your agreed terms for example – all partners will be entitled to an equal share of the profits regardless of their input under the act.
A partnership agreement will outline how to handle important events during the life of the partnership such as a member retiring.
What should be included in the partnership agreement?
- Partner details
- Partnership Business
- Decisions making
- Bank Accounts
- Profits and Losses
- Accounting Records
- Consequences of Death or Retirement
Parker Arrenberg has a wealth of experience and expertise in drafting commercial documentation of all kinds. With over 30 years in the industry, we understand that a well-drafted agreement can add significant value to your business whereas poorly drafted agreements can negatively impact your business.
Our Solicitors understand that commercial legal advice is about more than just paperwork. We will work with you and guide you in developing your trading relationships and ensure all your business needs are not only met but exceeded.
Your solicitor will always ensure that you are fully aware of any fees involved, and where possible we will work to a range of fixed fees depending on your requirements. If that is not possible, we will provide you with a very clear and transparent fee quotation that ensures you fully understand the fees you need to pay and what is included in those fees.
Get in Touch with our Commercial Contract Solicitors Today!
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