If you are in business with someone who is not your spouse or partner, you need a shareholder agreement.
A shareholders’ agreement encourages shareholders to contemplate, anticipate and work through all the issues that will confront them during the life of the business. The process of preparing a shareholder agreement forces on business partners the discipline of working through management and ownership issues before there is a major problem.
Examples of issues that will be addressed through the preparation of a shareholder agreement include:
- Valuation of contributions (especially important for new businesses)
- Decision making processes
- Remuneration for working shareholders
- Dividend policies
- Valuation of “sweat equity”
- Insurances for shareholders
- Exit by a shareholder (e.g. retirement, illness or death)
People are fallible. Conflict can occur but often people don’t have a framework to resolve that. In the absence of a clear framework, misunderstandings and unmet (or even unknown) expectations can escalate into costly, painful, and damaging disputes or litigation.
We have a robust framework for preparing a comprehensive shareholder agreement, and will take you through the process, in conjunction with your lawyer, of preparing a shareholder agreement step by step. The investment of time and effort up-front will pay for itself in the long-run, and will provide you and your fellow shareholders with greater confidence and peace of mind as you work together.
