SHAREHOLDERS - PROTECT YOUR INTERESTS!
Business has been booming for several years and you've been putting off updating your shareholders' agreement so that you can focus your energies on concrete projects that will generate growth. There's no point in doing it now, is there?
Monday, 6 o'clock. You learn that your business partner has died suddenly during the night. What are you going to do about it? A panoply of emotions and questions run through your mind:
Does the agreement take account of my partner's recent marriage?
Does the market value stated in the agreement reflect growth over the
3 last years?Had a share redemption clause been put in place?
The shareholders' agreement is the essential tool for ensuring the continuity of your operations in the event of major changes to your company or its shareholders.
To avoid finding yourself in this situation and thus avoiding a lot of hassle, the Mallette legal team shares a few thoughts with you that will help you understand the importance of working on your shareholders' agreement now.
QUESTIONS TO THINK ABOUT
Shareholders who continue to play their part in the company need to plan ahead and ask themselves the right questions. Here are a few examples:
Are the heirs identified by a shareholder the best people to make strategic decisions about the company? Is there an insurance policy in place to buy out their shares if necessary?
How can a shareholder's personal situation (divorce, separation, death of a child, criminal record, etc.) be prevented from having an impact on the company?
What remedies are available to ensure sound management of the company's activities in the event of a shareholder's indefinite absence?
What is the preferred process in the event of a shareholder's personal bankruptcy?
Conversely, if you are an outgoing shareholder in a company, are you aware that you could be prevented from receiving the cash value of your shares if no mechanism for selling or valuing them has been planned?
Good work upstream on the clauses of a shareholders' agreement can avoid many administrative, financial, personal and legal pitfalls, such as recourse to the courts.
Are you aware of the subtleties of the law that will help you avoid disasters? Make sure you surround yourself with a legal team specialising in shareholder agreements that will help you see things clearly.
NON-NEGLIGATIVE BENEFITS
Don't wait until it's too late to take advantage of a shareholders' agreement or update it;
It's a proactive and strategic approach that allows you to better control your risks. It allows you to establish the rules before a problem occurs.
The main benefits of a good agreement include
Protect your interests (monetary, decision-making)
Protect the value of the company
Prevent inequities between shareholders (in terms of profit sharing and pay scales)
Ensure commitment, the roles and responsibilities of shareholders towards the company
Providing the mechanisms necessary for continuity of operations
Ensuring smooth transitions between shareholders
Facilitating access to credit
When properly planned, a shareholders' agreement ensures your peace of mind and a healthy understanding between the owners of a company.
ACTIONS THAT MAKE A DIFFERENCE
To reap the benefits identified above, you need to take action:
Create your shareholders' agreement as soon as you start your business. Just as you wouldn't fail to insure your home in the event of a claim, you shouldn't wait for disputes to arise before putting the agreement in place and getting all parties to sign.
Insure the lives of shareholders. This will prove important in enabling those who remain to pay the estate in the event of death.
Update your agreement at each significant event that could change the structure of the company, its market value or that of its shareholders. For example, in connection with the acquisition of a new company, the arrival of a new shareholder, the divorce of a shareholder, the birth of a child, etc.
Surrounding yourself with multidisciplinary experts is essential when it comes to protecting your interests.
Mallette offers you an experienced team that understands the situations and issues caused by a poor shareholder agreement. We are able to offer you a simple and dynamic approach to achieve your business and personal sustainability objectives. Contact us to discuss your needs!