Starting a business venture with others is an exciting prospect.  However, because owners tend to put (understandably) on getting the company off the ground, they the important step of putting in place a business agreement founding partners., commonly known as shareholder agreements, are vital and understanding between investors on key matters relating to the company.

 

“The best thing I ever did in starting Slingshot with my partner was to spend the time to workout a shareholders agreement. This agreement has taken any concern or worry or grey areas out of the equation, so I can focus on our business.” Robert Clements, Production Director / Partner, Slingshot

While all business partnerships are different, a well-drafted shareholder agreement defines the rules of the game as to a variety of matters that will come up in any company’s lifespan. With these rules in place, investors can focus on what is most important; the growth and success of their business.  

Here is a list of some general areas that investors may want to cover off in a shareholder agreement.

Who gets to make the decisions?

Without a shareholder agreement, minority investors may find themselves without a voice in company decisions. Shareholder decisions (such as the election of directors or a decision to sell or wind-up the business) can generally be made by shareholders with a certain majority of shares, without the input of some minority investors. Minority investors can state in a shareholder agreement which decisions should require the vote of all shareholders or a special majority of shareholders.  

Minority investors can also ask that the shareholder agreement allow them to nominate one or more members of the board
of directors. Company directors are empowered at law to oversee the affairs of the business, so having some ability to control the board composition will be important for minority investors looking to be more than just a silent partner.


To read the rest of this article, click here. 

For more information, contact Jag Shergill at 604.685.3456.