Shareholder, Partnership, Joint Venture Agreements
A Co-founder Agreement is a contract between Co-Founders setting out the ownership, initial investments, and responsibilities of each Co-Founder.
Even if you are an established business entity, if you do not have one of the documents discussed below in place it is never too late to enter into one!
There is nothing more important than having a clear agreement between the founders (and owners) addressing key issues that are critical to your ability to safeguard the future of your new (or existing) business.
The key issues that any agreement must include are the roles and responsibilities of the founding team, equity ownership and vesting and IP ownership.
Shareholder Agreement (for Limited Company)
A shareholders’ agreement is an agreement between all the shareholders of a company. It is a vital document to any shareholder relationship which allows shareholders to regulate their relationship with one another, the company itself and its directors.
It is important to ensure that a company’s structure is carefully considered so that management and shareholder roles are identified, clearly set out and observed to. Shareholders do not have any duties or obligations to a company or its business under law. If a company has 2 or more shareholders it is sensible, arguable essential, to enter into a shareholder agreement setting out the rules and regulations upon which the shareholders, the company and its directors are to be bound by.
Shareholders’ agreements ensure all parties will have a better understanding of their rights and obligations. The obligations will lay down how the parties must act or behave in their operation/management of the business and others will be restrictions on what they can, or cannot, do without appropriate approvals and consent from the other parties be it other shareholders or the board.
As with any business a company can go through many changes and ownership through its life cycle. It is not uncommon for shareholders to fail to agree on matters, resulting in 'deadlock', or a fall out completely between the owners. In such circumstances, the shareholders’ agreement will define the correct exit route for the circumstance so that the company and its business are not jeopardised.
You should enter into a Shareholders' Agreement if:
your business has two or more shareholders;
you are setting up a new company or starting a new business;
you are buying a business with others;
you are acquiring shares in an existing trading company;
you are selling shares or transferring shares to others in your company, whilst retaining a shareholding.
If you have already established your business, it is not too late to put the protections in place and ensure that shareholders are protected in the future. You can enter into a shareholder agreement at any time not just when you set up a company!
Remember as with any agreement, terms, or contract – review it regularly. A document that was a 'good fit' years ago, may not be good now - ensure that they remain suitable and relevant.
Partnership Agreement (for Partnerships and Limited Liability Partnerships ('LLP'))
A Partnership Agreement sets out the rights, responsibilities and obligations of the partners who have entered into business together. It is a formal agreement between the partners during the existence of the partnership and also upon its dissolution.
There is no legal requirement to have a formal or written partnership agreement. There are some compelling reasons for having a written partnership agreement, these include:
A written agreement will ensure that the financial interests of partners are formally recorded.
If you don't have a formal partnership agreement, then the default provisions of The Partnership Act 1890 will apply which may not suit your agreed terms for example - all partners will be entitled to an equal share of the profits regardless of their input under the act.
A partnership agreement will outline how to handle important events during the life of the partnership such as a member retiring.
What should be included in the Partnership Agreement?
Profits and losses
Consequences of death or retirement
Joint Venture Agreement
A Joint Venture is a cooperative enterprise, business agreement or partnership entered into by two or more business entities for the purpose of a specific project or other business activity. The reason for a joint venture is usually to perform a specific project.
The Joint Venture parties involve the sharing of resources, control, profits, and losses.
Joint Ventures can be as informal as a handshake or formal legally binding written agreement.
Joint Ventures are often entered into for a single purpose or project and are not intended to last forever, they will have a finite date. However, in some circumstances they may also be formed for a continuing purpose.
Joint Ventures are separate business entities, to each of the JV parties, with shared interest and goals. The parties agree how to share income and expenses.
Why form a Joint Venture?
The parties to the joint venture maintain their own separate identities for all purposes except those of the joint venture.
Razor Consulting - Business Management provides sound commercial advice as well as drafting of legal agreements, polices and documents to meet your immediate and on-going business needs. We can assist, negotiate, and draft agreement terms with everyone connected to your business from co-founders, investors and employees to suppliers and customers.
We have helped start-up and established companies with various aspects of their business from designing their logo and creating their business plan to comprehensive HR support and drafting simple to complex agreements. We can help you with whatever goals you may have, working closely with you while still ensuring you have the time to focus on the day-to-day running of your business. We can help you grow your business safe in the knowledge that your business is protected. Our teams' knowledge and experience makes Razor the best placed consultancy to help you and your business.
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