Starting up a new business with one or more other parties requires focus, energy, commitment and co-operation. The typical process includes retaining legal and accounting/tax advice. Another usual component is a strategic business plan developed by the intended new owners. In addition, the business will likely require financing, and sourcing that funding will be an important objective.
While the above matters as well as several other aspects of a multi-owner start up will be understood as items to be addressed in the course of establishing the new business, there is a critical step to be taken which will often need to be brought to the parties’ attention. That step is the completion of a written agreement between or among the shareholder owners, ideally occurring at the same time as the incorporation and organization of the company.
A shareholders’ agreement should be drafted to fit the particular objectives of the people coming together to own and operate the business. Examples of subject matter contained in a shareholders’ agreement are:
- rights and obligations of the shareholders
- officers and directors and management of the company
- approval of material transactions and events
- restrictions on the sale of shares
- exit strategy for shareholders
- on-going financing (capital infusion)
- payment of salaries, bonuses and dividends
- purchase of the shares of a deceased shareholder
- restrictions on competition by a former shareholder
The owners of a start up will minimize the potential for lawsuits between themselves by having put in place a well-prepared shareholders’ agreement. The business lawyers at Tierney Stauffer LLP are experienced in the drafting of shareholders’ agreements to properly fit each situation.
Please do not hesitate to contact me or any other member of the business law group for more information on how we can assist with the establishment of your new business and the governing shareholders’ agreement.
John S. Grant, Q.C
Senior Legal Advisor – Business Law Group
Disclaimer: This article is provided as an information resource. This article should not be relied upon to make decisions and is not intended to replace advice from a qualified legal professional. In all cases, contact your legal professional for advice on any matter referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. Please note that this information is current only to the date of posting. The law is constantly changing and always evolving.