Partnership and Shareholder Agreements – Going to the Quick

Peter Welsh Law Partnership and Shareholder AgreementsIn nearly 40 years of practice, we have found the absence of partnership agreements or shareholder’s agreements has been the foundation of some unnecessary and usually vitriolic litigation.  Sometimes the litigation results in the demise of the entity, but in every case, the costs are more than significant, far dwarfing the costs of preparing an agreement in the first place.

We have repeatedly found, as well, a simple outline to introduce what is required which can be of significant assistance as business persons start up their relationship. 

We’ve reduced these key points to the following:

  • The 3 G’s

  • The 4 M’s

  • The 5 (or more) D’s

What does this mean?

It is simply this:  the 3 G’s mean “Getting in/Getting along/Getting out.”
The 4 M’s mean: “Money in/More Money in/Money out and Management.”
The 5 D’s mean:  “Death/Disability/Dissolution/Disaster/Desire (to leave)” (and a whole host of other words starting with “D”.)

The framework of a partnership or a shareholder agreement ought to address these 3 simple letters of the alphabet.  Sooner than later.

Partnership and shareholder agreements can be extremely short (not quite “back of the envelope”, but not necessarily an encyclopedia).  Almost any document that addresses these 3 letters of the alphabet is a significant benefit to the partners and shareholders should there be a dispute. 

Curiously, the moment reference is made to the original agreement, there is something in the offing that needs to be addressed between and among the participants. Hopefully, the Agreement will give direction on resolution.  If there is no Agreement, the participants are, regretfully, left with having to resort to litigation and, as referenced above, litigation is both extremely expensive and, almost invariably, unsatisfactory to any of the participants.

Should you be in the position of starting a business with a “partner” or fellow shareholder, call us first to guide you through this extremely important first step to avoid much bigger problems later.
 

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