When speaking with clients before they embark on a new business venture, I explain that part of my role as legal adviser is to play ‘devil’s advocate’ and assume that everything that could go wrong, will go wrong. Whilst one endeavours to cover off eventualities, it is nigh on impossible to predict the future.
In a business relationship, be it as shareholders in a limited company; designated members in an LLP; or partners in a partnership, it is best practice to have a formal agreement in place. This could be either a shareholders’ agreement, LLP agreement or partnership agreement.
Not only do these documents offer practical and proactive solutions, such as decision making, restrictive covenants and delegation rights, they also seek to anticipate what should happen if things go sour in the business relationship plus deal with terminal matters such as death and insolvency.
A ‘business pre-nup’, therefore, is one that business owners should most certainly invest in. Some things to ponder…
In the face of deadlock, what can one do? Ordinarily, if there is no binding contract in place, the ultimate sanction is court, which can cause both angst and expense.
What if a business partner dies – what should happen to their shares? Do you want to be in business with your late partner’s family members? Would you like the right to buy their share in the business? What happens if one of your business partners acts in such a way which is detrimental to the business? Should you have the right to expel them? What happens if you want to sell the business and your other business partners do not or vice versa?
Our role as legal advisers is not only to be constructive and proactive, but also to challenge the difficult potential outcomes and seek to provide mechanisms or solutions if the worst does indeed happen.
If you wish to discuss this further, please do not hesitate to contact Victoria Sampson by email: vls@cooperburnett.com or tel: 01892 515022
This blog is not intended as legal advice that can be relied upon and CooperBurnett LLP does not accept any responsibility for the accuracy of its contents.
This blog was originally published in the Tunbridge Wells Business Magazine: https://twbusinessmagazine.com
