Do Not Forget The Shareholder Agreements Before Starting a Business
A lot of businesses begin in a congenial atmosphere with the founding fathers sharing an interest in the same hobbies or business interest for mutual gain and profit. Each brings his or her own talent to the business sharing such things as expertise, finances and qualifications in exchange of gaining a profit for the effort. However, the honeymoon phase will only take them through the beginnings, after that, the friendship and business relationship must continually be forged as there will be differences and disputes that can crop up and lead to issues within the business. These can often deteriorate causing friction and even outright hostility between the shareholders. This can readily be avoided by designing clear and concise shareholder agreements before the business is ever off of the ground.
When there are not any agreements in place, disputes and other actions must be determined by a court of law. In these cases, the law must prevail and none of the shareholders will be able to have a say in the issue at hand. The issue will also become public domain and there will be no privacy left for the company. This is obviously not good for business and will give a bad impression to both customers and other investors. However, if there are shareholder agreements (here is a definition of them) set into place, this course of action will be done according to the agreements. In these cases, the right to privacy is retained and the agreement will ensure that there aren't any disputes.
There are many situations in which a company can be guided by such provisions. These situations are as follows:
Such considerations can readily be adapted into a shareholder agreement so that if they have to deal with such an action it is already set in place as to how to deal with it. Such agreements are enforceable by law.
When there are not any agreements in place, disputes and other actions must be determined by a court of law. In these cases, the law must prevail and none of the shareholders will be able to have a say in the issue at hand. The issue will also become public domain and there will be no privacy left for the company. This is obviously not good for business and will give a bad impression to both customers and other investors. However, if there are shareholder agreements (here is a definition of them) set into place, this course of action will be done according to the agreements. In these cases, the right to privacy is retained and the agreement will ensure that there aren't any disputes.
There are many situations in which a company can be guided by such provisions. These situations are as follows:
- Death of a shareholder
- Shareholders wishing to end their interest in said business
- A shareholder exiting the business
- Demands of a shareholder for voting rights on the business even when not on board of directors
- Deadlocks that affect the business
Such considerations can readily be adapted into a shareholder agreement so that if they have to deal with such an action it is already set in place as to how to deal with it. Such agreements are enforceable by law.
Specifics can easily be set into any agreement so that if a shareholder should exit the company, the valuation and terms are already set into place and everyone is protected. These provisions can be clearly laid out to allow the other shareholders to take up the positions at a pre agreed upon price. If there are third parties, they may also be able to pitch for such positions on the company's board and the agreements must state clearly the conditions in which this is allowable. There will also be some clarity on how said board members can be appointed and what powers they will hold. It is also very allowable to set restrictions on specific shareholders such as non-compete provisions if they leave plus setting rules and regulations for behaviour. Clear mandates must be set into place in order to determine what will happen to shares if someone dies or becomes incapacitated. Some businesses will favour trustees and heirs to take over those shares while others may require them to be put up for sale. You want this situation clear from the start rather than having disruptive discussions at the time when people's emotions are running high.
Good shareholder agreements will ensure that the business is not placed in a standstill status in case there are any disputes. It allows for shareholders to have some peace of mind knowing that everything is already set into place and under an agreement. The articles of association can readily be used to regulate the shareholders. With no set legal requirements in setting up the drafts other than providing provisions that will follow the natural course of justice, businesses are protected as are the other shareholders. These clauses will suit the shareholders and assure the positions.
Reaching these agreements prior to staring up the business is a way to prevent any disruption in the running of the business. This will ensure that the business runs smoothly no matter what happens in the future of said business. Every business needs to have this in place and it is quick and easy to set up by talking to a local commercial lawyer in Albany to draw up the document and having all of the shareholders sign the document.
At the start of the business, people are keen and in good communication with each other so that is the time to establish the shareholders' agreement. So for Albany shareholder agreements be sure to make contact with a top commercial law firm in Albany such as McVeagh Fleming.
Their website has more details http://www.mcveaghfleming.co.nz/.
Good shareholder agreements will ensure that the business is not placed in a standstill status in case there are any disputes. It allows for shareholders to have some peace of mind knowing that everything is already set into place and under an agreement. The articles of association can readily be used to regulate the shareholders. With no set legal requirements in setting up the drafts other than providing provisions that will follow the natural course of justice, businesses are protected as are the other shareholders. These clauses will suit the shareholders and assure the positions.
Reaching these agreements prior to staring up the business is a way to prevent any disruption in the running of the business. This will ensure that the business runs smoothly no matter what happens in the future of said business. Every business needs to have this in place and it is quick and easy to set up by talking to a local commercial lawyer in Albany to draw up the document and having all of the shareholders sign the document.
At the start of the business, people are keen and in good communication with each other so that is the time to establish the shareholders' agreement. So for Albany shareholder agreements be sure to make contact with a top commercial law firm in Albany such as McVeagh Fleming.
Their website has more details http://www.mcveaghfleming.co.nz/.