Posted by: Glenn Ferguson | Date: 5 April 2012
I was recently asked to give advice to the client in relation to a partnership agreements that they had signed in their business. The agreement had been purchased online and my client had basically “filled in the blanks”.
My client is now a 50% owner in the business but because of the terms of the agreement that was signed, my client has no say at all in the management and operation of the business. This news was distressing for my client, especially given the business relationship is deteriorating.
This type of situation could easily have been avoided by the parties seeking advice and properly documenting an agreement that actually reflected the arrangement between the parties. A properly drafted agreement can serve to avoid unnecessary disputes arising throughout the term of a business relationship.
A shareholder or partnership agreement should address a number of issues, including:
I also have found from experience that addressing these issues at the commencement a business relationship allows the parties to address some difficult topics before they commence the business relationship. I have had occasions where clients have decided not to go into business with another person as a result of negotiations for the shareholder agreement.
If you have any questions in relation to shareholder and partnership agreements, please do not hesitate to contact me.