Many people say “don’t go into business with your friends”. For some it works out, and a successful business is established but for many others, it ends the friendship. A Shareholders Agreement may help protect your business and your friendship. It sets out the rules if a shareholder wants to leave (the business), dies or if there is a dispute.
A lot of new businesses are conducted by companies, where both friends are the directors and shareholders. If a company owns the business then a Shareholders Agreement is the document which is often overlooked, but it may be the most important document in the event a dispute or unexpected events arise. A Shareholders Agreement is a document that governs the relationship between the shareholders, and the company itself. It includes matters such as:
- adopting and amending business plans;
- holding board and shareholder meetings;
- rights of the shareholders to appoint board members (and directors);
- decision making by the board and members; and
- transfer and disposal of shares (and for how much).
More importantly, a well drafted Shareholders Agreement should also include information about:
- dispute resolutions;
- events of default;
- capital / fund raising;
- what happens if a director or shareholder dies or becomes totally or permanently disabled or incapacitated.
A Shareholders Agreement which covers the above matters, will help you and your friend (and business partner) carefully navigate through any issues that may arise.
The solicitors at Mullane Lindsay have the experience to advise you as to the most suitable Shareholders Agreement (or other agreement) and the draft agreement for your consideration.
