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.
