Shareholder Agreements – Crucial In Partnerships

shareholder agreementsShareholder Agreements In Joint Ventures

Shareholder agreements are legal documents that protect a business. Are you thinking of embarking on a joint venture?  You need to protect your business interests.  If you’re in business with someone else, remember that a partnership cannot exist without a legal document prepared by a corporate lawyer.  You need to make provisions for any potential conflicts, disputes and pitfalls.

Protecting Business Interests

Shareholder agreements protect the business interests of companies.  For instance, shareholders who leave on bad terms will not affect the smooth running of the business, if  there is a shareholders agreement in place.  You and your partners need to make provisions that cover all areas of the business.  Essentially, you need to protect your intellectual property and the distribution of company profit.

Business Ownership

Shareholders own part of a company, like a slice of a cake.  If you are a shareholder you own part of the business, a slice of the cake.  You share the cake with your partners, so each partner takes a slice of the cake.  This entitles you and your partners to make decisions which affect the running of the company.  All business profits entitle you and your partners to a percentage stipulated in the shareholders agreement.

Pros and Cons in Partnerships

When you are a shareholder you are entitled to a part of your company’s profits.  Equally, you share that profitability with your partners.  On the other hand, the flip side is that you and your partners are affected by pitfalls and a loss in revenue.  You and your partners can exercise the right to vote and the right to influence each other when it comes to making decisions.  You and your partners have the right to management selection and the right to make crucial decisions that affect the finance, PR and marketing.

A business can take a different direction, either because of a great profit or a grave loss.  Disputes can arise as a result of profit or loss in revenue.  That is why a shareholders agreement is crucial in a joint venture.  It’s a legal document that will cover eventualities and settle issues before they escalate.  It’s a document that needs to be prepared by a business law expert.

Are you thinking of a joint venture?  Are you in a partnership and would like to discuss further?  Please contact us for an initial informal discussion with one of our business law experts.  SG

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