When starting up a new venture with a partner or fellow shareholder it is always advisable to set down on paper the rights, obligations and roles of the parties. New entrepreneurs often overlook the importance of having an enforceable Shareholders Agreement (or Partnership Agreement) to govern how the new company is run. Beyond setting out the general framework for the operation of the new company, a Shareholder/Partnership Agreement can be a crucial document to help transition the company if and when one partner/shareholder wants a change. Without a written agreement, the company can be stuck at a deadlock with no easy way out. Incorporating a buyout, such as a shotgun clause will help the parties fairly decide who is to take over the business. Shareholder Agreements also help clarify what happens on the death or incapacity of another shareholder, the bankruptcy of a shareholder, how meetings are held, etc.
There are many options available, but the one route you don’t want to take is failing to set down any agreement at all – it can be a very costly decision. We would be happy to go through the options with you to determine the right ‘fit’ for you and your partner(s) to come to an agreement everyone is on board with.