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Working with Partners in a corporation

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Working with partners, whether as active participants in the business or just as a silent investor, brings lots of benefits and might be one of the keys for the business success. By combining personal strengths of partners and mitigating weaknesses, by allowing a combination of financial investments with great ideas or good entrepreneurial minds, many business partners are able to achieve incredible results and to develop their businesses to the levels of unprecedented and unforeseen success.

Along with the possible benefits of a partnership, partners might face serious disagreements and conflicts that might jeopardize business growth and sometimes even completely destroy a business. By making proper preparations and ensuring that investment and the expectations of each partner are clearly defined and set out in a formal shareholders agreement, business entrepreneurs can prevent or mitigate many of the risks and hurdles on the way of their business development.

The basic areas of concern include:
a. Define the investment of each partner – what, how much, when etc.
b. Define the equity holding of each partner – the percentage of shares of a corporation
c. Define the controlling interest of each partner – who has the power to elect directors, appoint officers, sign financial and operating documents etc.
d. Define the limitations on sale of shares, provide for the right of first refusal to other shareholders and/or corporation
e. Define what happens in a case of a marital breakdown or a death of a partner – allow the corporation or other shareholder to purchase the shares instead of the transfer to a spouse or heirs.
f. Establish a “shot-gun” clause that allows partners to force other partners to buy/sell their shares in satiations of impasse or unresolvable conflicts between the partners.

Depending on the relations between the partners and their personal expectations, the agreement might require further provisions and special stipulations, but those listed above provide the main framework for partners to establish their relations.

We at CBES will be happy to assist you in your particular and unique situation and will help you to structure the most preferential shareholders agreement that will protect your rights and the rights of your partners.

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All information provided in this video is for informational and reference purpose only. Nothing contained herein shall be considered as a legal advice or instructions to be acted upon. CBES – Canadian Business and Enterprise Services does not offer legal advice online or on its YouTube channel. Please consult a professional before you act in reliance on the information contained in our videos.
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Business
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