Sydney Business Lawyers provide expert advice in a number of areas. Please select from either list below the area which interests you.
Shareholder & Partnership Agreements
If you are about to invest in a business or other asset owned by a private company, partnership or unit trust, there are many issues to consider. However, have you considered the following:
- How will liability be shared between the investors?
- How will the business be funded (both on set up and for working capital purposes)?
- How will decisions be made and what will the voting rights be – is it 1 vote per head or should voting rights reflect equity rights?In a company, this needs to be considered at board and shareholder level and in the case of a unit trust, there are control issues at trustee and unit holder level. At director level, are votes to be 1 per head or should voting reflect equity rights? In a company, is there to be a right to appoint a director?
- What happens if there is an impasse in making decisions?
- How will decisions be made about profit distribution?
- What will be the process for holding meetings of the investors?
- What if a third party wants to buy the business or asset but a minority investor holds out for more?
- If a key person dies, is disabled or suffers a critical illness, will they have to exit their interest in the business?
- If yes:
- how will the interest be valued?
- how will the exit be funded? (eg will insurance be used?)
- do you understand how to manage unwanted tax in structuring these arrangements?
- will there be certainty about the passing of control to the other investors?
- Apart from death, disability or critical illness, are there other things that trigger a right or an obligation to exit the business, such as:
- right to buy out others at any time?
- voluntary exit at any time?
- compulsory exit for breach of the agreement, such as by bankruptcy or being involved in family law proceedings?
- reaching a nominated retirement age?
- NB Some say that the exit strategy is the most important provision of all to get right!!!!
- If an investor exits the business, can they compete against it?
- How will disputes be resolved? Is there an exit strategy in the case of dispute and generally?
If these issues concern you, decisions about them should be made and recorded in a written agreement.
There is no such thing as a standard agreement, as each agreement needs to be tailored to the particular requirements of the business, the business owners and their objectives and attitudes to various issues.
We have developed a questionnaire that prompts thought on all of the issues that should be taken into account when creating such an agreement. The questionnaire ensures that important issues are not overlooked and is an efficient way of taking your instructions about them.
If your business has unique requirements, we can help you shape a solution to deal with them.
If you would like to discuss any of these issues or your requirements generally, please contact Sydney Business Lawyers on 8915 4900 or firstname.lastname@example.org.