You work hard to start your own company and invest time and effort into making it work, only to have problems either with fellow colleagues or, more personally, at home. So how do you protect your assets when either starting a business with other people or in the unfortunate breakdown of a marriage?
So you have a great concept or product, funding and perhaps a friend, relative or colleague that wants to join forces with you. The key to any successful business is good advice, support and above all appreciate the risks, liabilities involved and how you come out on top to fight another day if it all goes wrong.
There are many things you need to consider when starting up, merging or expanding, but one key thing to add to your to do list a shareholder’s agreement where there is more than one of you. It is the only way to protect you and your business. This contract sets out the terms of ownership of the business, clarifies everyone’s expectations, determines the powers of each shareholder and very importantly provides a method for resolving disputes that can arise between the owners and, if a resolution is not found, determine how to dissolve the relationship.
A soundly drafted and legally binding shareholders agreement can be the only thing that saves your business if a dispute arises, but it is also a proven mechanism of laying out the business processes so that you all agree and follow them from the beginning. It will cover financial matters, such as transfer of shares, raising funds and dividend agreements, but also management matters, such as determining the appointment or removal of directors and how parties will vote on certain matters.
We appreciate that when starting up a company these matters and formal shareholder agreements may not be the first thing on your mind. If the metaphorical horse has already bolted, then we recommend having this discussion now before you need to be considering exit strategies and you find nothing can be agreed.
While the breakdown of a business relationship can be problematic and difficult at best, the breakdown of a marriage can be simply devastating. Not only will the business interests be included in any discussion but also further investments and potential earnings for the future.
In the case of any divorce, a lot will depend on your current circumstances, any children and your spouse’s own financial situation. Keeping a clear division of your finances may make it easier to deal with but will not stop a court looking at the asset for division. Similarly, any course of dealings will not protect an asset and nor will previous verbal agreements or tacit understandings that inheritance is solely for one party; a court is only concerned with ‘fairness’.
So therefore just as you would be prepare before starting your own business, you need to prepare for marriage and consider the fine print ‘terms and conditions’ usually left unread. It may seem unromantic but the advice here is to get a well drafted pre-nuptial agreement in place, where each of you sit and have an adult conversation about your current financial circumstances and the future. While not necessarily binding, when they have been properly prepared you would need a good reason to depart from it and the court will find them highly persuasive in what you considered fair at the time.
Our experience is that these documents take the heat out of most divorce cases and the parties can navigate an already difficult time of their lives without being forced to consider options and alternatives they never thought about.
Whatever problem you face, either in business or in your personal life, we have solicitors who can help and advise you along the way, looking out for your best interests and protecting your future. If you have any questions about either shareholders agreements or prenuptials then please call us or email us directly.
For more information, please contact us at firstname.lastname@example.org or on 0207 426 0382.
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