You’re wrong if you think you don’t need a shareholders’ agreement

Many agents think “We all get along – we don’t need to spend money on a shareholders’ agreement”. Top agents know this is not true, and we’ll tell you why…

Don’t get stuck

O*NO! It’s now painfully obvious how suddenly unexpected crises can crop up! In order to master the unexpected, your business model needs to be able to adapt. You and your crew will need ship-shape foundations to ride those crazy waves.

The last thing you need is to get stuck in a stalemate, up the proverbial creek minus a paddle. Long term – things will change, as you expand and explore your business avenues. That’s why you need agreements in place that will allow your business both flexibility and stability.

What’s the point?

Have you ever wondered “What’s the point of a shareholders’ agreement? There’s no legal requirement, so why should we bother when we have so many other boxes to tick?”

In drafting a shareholders’ agreement, you and your business partners get to make arrangements privately about the rights & obligations of the shareholders in your organisation.

An agreement can set out the relationship between the parties involved, how you behave towards each other, what you are allowed or not allowed to do during your partnership & after the relationship ends, rules around capital and financing, admitting a new business partner, and how an exit will be conducted.

The agreement will be enforceable, but there are no strict rules about what goes into the agreement.

So you get along

When starting out on a new business venture, you are amped at the possibilities.

If you have decided to go into business together, it is likely because you get along so well. Perhaps with your good intentions, you could be forgiven for neglecting to think about where it all might go wrong.

Besides, would it give off the message that you don’t trust each other if a shareholders’ agreement is suggested?

Not at all! In fact, the reason you do get along so well NOW means that this is absolute the best time for you to nut things out together.

And the less doubts any of you have about the future of your organisation, you will be better able to make decisions together going forward.

Use the optimism of the start-up phase to share your ideal outcomes of the venture, including everyone’s overall end game strategy. This will help to solidify your understanding of what the other parties want to get out of the venture & whether your own goals will be accommodated.

Do you know how to dispute?

It’s a mistake to assume your own plans are already clear to the other parties if you haven’t laid it out really simply.

Perhaps in your efforts to keep getting along, you might be one to smooth things over and keep your colleagues happy. But don’t get blindsided.

How confident or comfortable are you that you can effectively resolve disputes?

Don’t leave the most important discussions with your partners until red flags start cropping up. Once people are feeling uneasy, there may be less willingness to negotiate.

Planning

Your shareholders’ agreement tells others that your business has solid planning – this is a no brainer.

Because it shows that you can negotiate, and that you value relationships, both the individuals involved, and the agency as a whole will be more attractive to work with.

Future proofing your relationships

You want your partnerships rock solid. Having an agreement in place can prevent conflicts, people getting burnt, and friendships going sour.

You might even find some new things out about your partners that will help you to work together – and to avoid conflicts that could end up costing your business.

This is an important step towards future proofing your working relationships – the most important part of your agency!

Takeaway

If you’re considering going into business with someone, or are in business already and haven’t got around to thinking about your shareholders’ agreement, then have a kick-off discussion with your business partner to get the ball rolling.

Your next steps

Not sure how to approach the conversation with your business partner, or unsure what needs to go into your shareholders’ agreement? Book a FREE 10 min chat with us today to discuss your options.

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Boring legal stuff: This article is general information only and cannot be regarded as legal, financial, or accounting advice as it does not take into account your personal circumstances. For tailored advice, please contact us.