““Newcomers to selling a business we were recommended to Jane through a business associate. We had met with other commercial lawyers previously but immediately warmed to Jane’s approachable, open and no nonsense style. Completely satisfied that Jane had our best interests at heart and working our way through some complex issues, Jane’s sound advice, timely communication and supportive presence were invaluable. No push over either when it came to the final stages of negotiation, confident and knowledgeable throughout, Jane was our trump card.””
Stan Singleton, Asif Ahmed and Ron Curwen
It is essential to clearly set out the rights between you and your fellow partners, limited liability partnership members or shareholders from the outset. If you do not, you leave yourself vulnerable to problems should things go wrong in the future.
From the very start of your business, where there is more than one of you, we cannot stress enough how important it is to make sure that you have in place a Partnership Agreement, an LLP Agreement or Shareholders Agreement. It is always tempting to put this off on the basis that you do not want to incur the expense; however, believe us when we say that in our professional experience it will cost far more in stress, time and money to sort out a future problem if you do not have an agreement in place from the outset.
If you are considering trading as a partnership then you must have a Partnership Agreement that sets out all of the rules, duties, obligations, benefits and liabilities between you and the partnership business. If you do not have a Partnership Agreement then all you can rely on is a very old statute which, by default, may create a scenario that you did not envisage. Sadly it’s a fact that many partnerships fail within their first three years, so having a clear exit strategy, through the Partnership Agreement, when partners fall out is crucial. If you do not have this then exiting from a partnership will, in all probability, be more stressful, time consuming and expensive.
If you decide to trade as a Limited Liability Partnership (LLP) then you should have an LLP Agreement between each of the members of the LLP. This agreement sets out all of the rules, duties, obligations, benefits and liabilities of each member of the LLP. Without it, and should something go wrong, you would have to rely on the general law relating to LLPs, which may not give you the protection and power that you need or want. An LLP Agreement can also reduce the stress and expense spent on exiting from the LLP if there is a dispute between members.
Should you wish to trade as a company and there is to be more than one shareholder, then in most cases it will be important that all the shareholders enter a Shareholders Agreement. The contents of the Shareholders Agreement will depend on who has the balance power and who wants protection as a minority shareholder (i.e. someone who has less than 50% of the shares) and what level of protection that ought to be.