Many start a business with a friend. However, when business issues become a factor in a friendship, both the friendship and the business may suffer. To avoid that and to ensure effective control of the company and certainty of roles and duties of everyone involved, put your intentions in writing.
Define ways to deal with future problems
A shareholders’ agreement confirms arrangements the business partners agreed to in the first place. It will set out:
- Exit strategy in the event of disagreements; and
- Mechanisms to allow parting ways on fair basis.
These strategies and mechanisms save time and help avoid costly litigation.
Protect all your shareholders
The corporate legislation has various rights and remedies protecting minority shareholders, giving them tools to fight for their interest. This causes the majority of Shareholders’ Disputes. Shareholders’ Agreement will set out ways to deal with those without going to court.