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PARTNERSHIP
AND SHAREHOLDER AGREEMENT
PARTNERSHIPS
If you decide to operate your business as a partnership you are
well advised to have a partnership agreement drawn up. Without one,
many disputes or questions may arise, and it will be the Partnership
Act 1890 which will have to be the sole reference point. This is
very old legislation, and it is often inappropriate for the needs
of a modern business.
We can advise
you on what type of partnership agreement you will require, and
will draft it for you making sure the following key issues are all
dealt with:
TERM OF THE
PARTNERSHIP
Should the partnership be indeterminate or for a specified period
of time?
NATURE OF THE
PARTNERSHIP BUSINESS
So that any other new types of business can only be entered into
with the unanimous consent of the partners how is the nature of
the business to be defined?
PARTNERSHIP
NAME
What are the legal requirements for the name of a partnership?
INCOME
Precisely how will the profits (and losses) of the business will
be split? You may have very simple or complex requirements. We can
advise on this, and also on how best to ensure the Revenue do not
attempt to class the partners as employees and tax them accordingly.
CAPITAL
What will be the arrangements for the financial input of each partner?
will there be provisions for future investment of capital?
PROPERTY
Which property is to be regarded as partnership property and which
is to remain the property of individual partners?
MANAGEMENT
What will be the procedures for the general day to day running of
the business? Provisions for meetings, voting and all other administrative
matters need to be clarified in the agreement.
ABSENCES/ILLNESS
How will you deal with partners who may be absent for whatever reason
for a long period of time, bearing in mind that normal employment
law does not cover partners?
RESTRICTIONS
Will you place restrictions on partners from working for or setting
up competing businesses during their time with the partnership and
after they leave? Such clauses are heavily regulated by the law
and in order for them to be enforceable you should seek our legal
advice.
DISPUTES
How will disputes be dealt with? Commonly, it is possible to refer
matters to a specialist independent arbitrator. We can advise on
this.
NEW PARTNERS
On which terms can or can not a new partner be introduced? The procedures
for introducing that partner should be expressed.
DEATH OR EXPULSION
What will happen on the death of a partner? in which circumstances
can a partner be expelled? The financial arrangements for either
of these scenarios should be expressed. There may also be tax implications.
We can advise on all of this.
SHAREHOLDERS
If you operate your business as a company, and especially where
the shareholders are the directors or employees of the company,
then many of the issues relating to a partnership agreement are
equally pertinent. These should all be considered and included in
a shareholders agreement. Although many of those matters will be
dealt with adequately by the articles of the company, there are
a few key advantages specific to a shareholders agreement. We can
advise you on these, and prepare the appropriate documentation.
CONTRACT
A shareholders agreement is a contract, and it will be far easier
(and cheaper) for this to be enforced in the event of a problem
than by relying on the articles or the Companies Acts to provide
a remedy.
DIVIDENDS
The law does not automatically entitle a shareholder to a dividend,
but the agreement can be drafted so as to require (or restrict)
the payment of a dividend.
ISSUE OF SHARES
AND PROTECTION OF VOTING RIGHTS
One of the main uses of a shareholders agreement is to protect the
holders from the "watering" of their interests. This means
that the company might be prevented or restricted from issuing new
shares thus making the existing holdings less significant and valuable.
Similarly, minority holders might be given the right to be included
in any sale by the majority shareholders. There are numerous matters
which need to be considered here, and we can advise on the most
suitable provisions for your business.
PROTECTION
OF INTERESTS
Unless different classes of shares are issued, the company is bound
to treat all shareholders alike. If you wish certain members to
have preferential rights we can incorporate that into a shareholders
agreement.
SECRECY
The agreement, unlike the articles, is not open to inspection by
the public.
VETO
You may wish that one member has the power to block any proposal
that the business suggests. We can advise on the implications of
such a clause and include it in an agreement if you desire.
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