29 March 2022

A story about a messy business divorce – why you need a shareholders agreement!

Submitted by: SchoemanLaw Inc

By Robyn Shepherd

Launching a new business venture is an exciting chapter for any new entrepreneur. However, when entering into any business relationship, one should remain objective when concluding a shareholders agreement. It may prevent any disputes and ensure a gracious exit for shareholders wanting to exit.

This is precisely the lesson Karen learnt when starting her marking business. Karen met Josh when they were still employed. They got along well and thought of starting their own business after both of them left their mutual employer. Both thought this would be great and easy, so they quickly registered a company. Karen would be in charge of the systems and processes and Josh business development. Soon, things became busy, and before they knew it, both were doing everything in the business.

Josh's mother fell ill, and he decided to exit the business. Still, because he and Karen never spoke about valuations nor kept track of contributions properly, they soon disagreed about the terms.

Josh and Karen could have avoided any disagreements about the valuations if they had concluded a shareholders agreement early on in their engagement.

A shareholders agreement is a valuable tool that sets out a number of important provisions, such as:

How to value shares How to deal with it when the business needs cash and how to deal with it if all shareholders are unable to contributeExit – whether voluntary or through a forces procedure (e.g. due to a change in circumstance such as long term illness and death)Confidentiality and Protecting the Business’ InformationDispute Resolution

At https://contracts4biz.co.za/  you are able to obtain your own agreement and if needs be a helping hand at SchoemanLaw can help you update it to suit your needs. Click here: https://app.contracts4biz.co.za/login.html to register today!

SchoemanLaw Inc

SchoemanLaw Inc Attorneys, Conveyancers and Notaries Public is a boutique law firm offering its clients access to high quality online legal documents and agreements, together with a wide range of legal services. The firm has an innovative and entrepreneurial mindset that distinguishes it from other law firms. We apply our first-hand understanding of the challenges facing entrepreneurs (regardless of their business size) to develop proven, practical solutions incorporating legal compliance, risk aversion and business sense. We achieve this by offering clients tailored, yet holistic support comprising of legal gap analysis, the design of tailored legal solutions and the practical implementation thereof through training and automation. With your personal interests in mind, our ultimate aim is to implement measures that protect the results of your hard work as effectively as possible.