Starting a new business is an exciting undertaking. While all your focus should be on delivering the best product or service you can, it is important to deal with the legal implications at the outset.
Whether your business partners are your friends, or simply like-minded individuals, the risk for a shareholder dispute is significant unless the relationship between the partners is clearly set out and agreed upon.
For businesses with more than one shareholder, we at O’Connor Richardson strongly advise shareholder agreements be executed prior to the business taking off. A shareholder agreement will set out procedures for:
· Payment of dividends
· Appointment of directors
· Buy/sell provisions in case of retirement
· Sale of shares
· Issue of new shares
· Classes of shares
Agreeing on these procedures at the beginning of the business venture will decrease the chances that a shareholder dispute will arise later on. This could prevent the parties from becoming embroiled in a complicated lawsuit.
A shareholder agreement provides for all shareholders a framework to operate their business and protects each party from undesired consequences. At the end of the day, nobody wants to enter into a business with a partner who takes out more than the business makes.
At O’Connor Richardson we have the expertise to draft shareholder agreements tailored to your particular needs.