Shareholder agreements – the often unknown effects

The business world relies on a series of agreements between different entities and individuals working within the businesses. While oral agreements may be perfectly acceptable in some situations, they are more difficult to enforce in a court of law. Therefore, the written agreements clearly stating all of the expectations and requirements of both parties, as well as what will happen in case those expectations are not met, are quint essential for the businesses and individuals. These agreements are heavily relied upon in just about every legitimate business situation.

Whatever your specific type of business venture, you will need to have various kinds of agreements in place. At Murria Solicitors, we can help you understand which agreements are required by your business which would meet your company and your specific circumstances. We can assist you to implement these agreements accordingly.

Here is a quick guide to three of the more common business agreements with which we can help you:

* Partnership Agreements
If you are about to enter into a business venture with another person, you would be very well-advised to draw up a partnership agreement to set out the exact terms of your business relationship. The agreement should provide clear information concerning that relationship including each partner’s specific obligations and expected contribution to the business. A partnership agreement will protect each party’s investment in the business, and it should also set out certain parameters of the partnership, including rights and responsibilities, percentages of beneficial ownership, projected partnership duration etc. It is essential that complete agreements are in place at the beginning of a partnership to ensure that costly and damaging disputes are avoided should the partnership come to an end, or if a partner acts in a detrimental manner to the partnership and the other partners’ interests while working as a partner or after exiting the partnership.

* Shareholder Agreements
Shareholder agreements clarify how a business is run and detail the rights and the responsibilities of shareholders. These agreements also ensure that shareholders are treated with fairness, are kept informed and are sure to play an important part in the decision-making process.

Some of the key issues to be addressed in the shareholders agreement are : management responsibility including appointment of directors, dividend policy and directors remuneration, funding , voting rights, deadlock and dispute resolution, transfer of shares, , termination , exit routes, death or bankruptcy of any party, , hiring and firing employees, Selling shares, how to take a loan, dismissal of directors, restrictive covenant of not to completing after quitting the company protection of minority shareholder. The Articles of Association of the company does not cover these matters.

Therefore, a shareholder agreement should be put in place when a new business is initially set up, in order to make sure that you and other eventual shareholders are protected, should circumstances change and disputes arise. However, with the agreement of all the shareholders , it can be put in place after commencement of the operation of the company’s business.

A shareholder agreement would ensure that each shareholder is fully aware of their duties and their rights within the company. It can also safeguard the company against the effects of a shareholder’s personal circumstances, as well as protecting the interests of a shareholder’s family in the event of the shareholder’s death.

* Joint Venture Agreements
Joint venture agreements cover the joining together of two or more individuals or businesses for one or more of a range of specific reasons, including but not limited to sharing resources, extending market reach, combining knowledge or information, buying a property for investment purposes jointly etc for sharing profits. It differs from a partnership in that there is no transfer of ownership. It is common for two small businesses to merge in a joint venture in order to gain mutual benefits and to have an advantage over market competitors. Although they can be a great way to pool expertise etc, they can also potentially lead to disputes if the legal parameters are not clearly and correctly laid out.

As well as these types of legal agreements, Murria Solicitors can assist you with employment contracts, purchase and sale agreement, settling terms and conditions of your particular business, supplier and customer contracts as well as any other third-party contracts including non-disclosure, confidentiality agreements, agency & distribution agreement, and franchise agreements etc.

The properly drafted relevant agreements for your business will save your company time and money in case of dispute as well as giving you the peace of mind to enable you to concentrate fully on making your business a resounding succeed, give Murria Solicitors a call today.