[et_pb_section bb_built=”1″][et_pb_row][et_pb_column type=”4_4″][et_pb_text _builder_version=”3.0.106″ background_layout=”light”]
Shareholder Agreement
My business partner and I have a shareholders’ agreement, found on the net. We are ready to sign… Should we get a lawyer?
Answers from some of our board members….
ERIC: As a litigation lawyer, my take is:
The rights and obligations spelled out in shareholder agreements, particularly in smaller businesses, can come into focus in the event of totally unexpected circumstances: a sudden severe disability or untimely premature death of a shareholder or, more often, can be something like a fall out between shareholders whereby one or more would want out of the arrangement completely.
The law libraries are full of judicial decisions adjudicating shareholder disputes in which the shareholder agreement itself must be interpreted by a judge. Such situations can arise where the agreement is inexplicably silent on an important term and the court must try to divine what was “intended” by the parties to the documentor. There may be conflicting and inconsistent paragraphs. Even misleading paragraph headings can create ambiguity. The list goes on.
If you find yourself in a shareholder dispute/lawsuit you do not want to hand over to your litigation lawyer a shareholder agreement that you have cobbled together from examples taken off the internet. You do not want the lawyer to say “You have not had this prepared by a lawyer, did you?” Nor do you want to hear the lawyer say “No one had separate independent legal advice before they signed this, did they?”
Instead, make an appointment with a lawyer that has experience in corporate law and expertise in shareholder agreements.
Do some research before the meeting using the internet and other sources. Go prepared. Ideally, bring a three page memo with your basic information and what you want to see on the important terms in the shareholder agreement. The lawyer will appreciate the effort. Rely on the lawyer’s expertise. Look at the time spent and fees paid as insurance.
JIM: Having a lawyer’s guidance offers independent assurance to the process. A shareholders’ agreement addresses a wide range of issues, some of which may be unique to your business and may not be available on a generic document. You would also benefit from having a neutral third party asking for your individual input, making sure that your agreement reflects your specific objectives.
These are the basis on which your company will operate: how share structures will work, how a Board of Directors would function, who are the owners of this business, how future relationships will be structured. Saving money at the early stages of your business could result in costly problems later on, especially in considering future opportunities.
DOREEN: The answer would be a resounding yes to having a good corporate lawyer. This is the cost of doing business and is essential for covering the specifics of one’s business as well as the partners’/shareholders’ individual needs and desires. There is a honeymoon period when starting a new business but when the honeymoon is over, every ifs, ands or buts of how the business is run should be down on paper, not only for day to day partner operation but for the future when the business is to be sold or a partnership wants to be dissolved. A very wise idea would be to have personal council for each partner as well as council for the business. The lawyer dealing with each person and the business at once has a conflict of interest.
FLETCH: Shareholders’ agreements are critical and should be thought out with lists of what you and your partner personally expect from and in the partnership. It should be set out very clearly in that agreement. All this must be run by a lawyer.
[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]