Commercial agreement solicitors

Below is an introductory guide to a number of commercial agreements, if you would like advice on any aspect of a commercial agreement contact our specialist solicitors on 0203 816 9303 or complete our online enquiry form and a member of the team will contact you directly.

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Shareholders Agreements

What is a shareholders’ agreement?

A shareholders’ agreement is an agreement between the shareholders of a company and governs the way in which the company is run. The agreement will describe how the company should be operated and the rights, responsibilities and obligations of the shareholders. The agreement will also regulate the relationship between the shareholders, the management of the company, ownership of shares and the protection of the shareholders.

Why do I need a shareholders’ agreement?

If you are a shareholder to a company with one or more other shareholders then you should always consider whether a shareholders’ agreement is required. Shareholders’ agreements are particularly important in protecting minority shareholders against the majority shareholders. Without a shareholders’ agreement the company will be under the control of those who own the majority of the voting rights at any meetings of the company.

What does a shareholders’ agreement provide for?

The shareholders’ agreement can provide for many eventualities including the financing of the company, the management of the company, the dividend policy, the procedure to be followed on a transfer of shares, deadlock situations and valuation of the shares.

A shareholders’ agreement is a private document and does not need to be disclosed to any third parties or filed at Companies House. Provisions can be made in a shareholders’ agreement that the members wich to remain confidential and private.

What could happen if you don’t have a shareholders’ agreement?

In the absence of a shareholders’ agreement there is much potential for dispute and disagreement between the shareholders. In most scenarios a company will be set up by like minded individuals with a common goal; however those views can easily change over passage of time. Typical disputes centre around investment of profits, growth of the company etc. One shareholder may also wish to sell his/ her shares and the remaining shareholders may not agree with this. Shareholders’ agreements contain provisions that pre-empt such disagreements and set out appropriate ways for such disputes to be addressed, for example providing remaining shareholders with the right of first refusal on any sale or transfer of shares. Shareholders’ agreements can also provide for circumstances where shareholders act against the wishes of other shareholders and provisions for forcing the exit of defaulting shareholders. 

    Partnership Agreements

    What is a partnership agreement?

    A partnership agreement is a written agreement between two or more individuals who join as partners to form and carry on a for-profit business. The Agreement will state the nature of the business, the capital contributed by each partner, each partner’s rights and responsibilities.

    A partnership can either be set up as a traditional partnership or a limited liability partnership.

    A traditional partnership does not have a separate legal existence like an incorporated firm, and the partners are jointly and severally liable for the debts of the company. Even on withdrawing from the partnership the partners remain liable for already incurred debts and even for future debts unless their departure is correctly documented.

    The partners in a limited liability partnership aren’t personally liable for debts the business can’t pay. Their liability is limited to the amount of money they invest in the business.

    Limited liability partnerships are most often set up by professional services firms, like solicitors or accountants.

    Unlike a traditional partnership the duty of good faith is not implied into a limited liability partnership and so it is essential that a partnership agreement is entered into to govern the conduct of the partners towards each other.

    Do I need a partnership agreement?

    All partnerships require a partnership agreement, sometimes referred to as a ‘partnership deed’. A partnership agreement is required to allow the partnership to expel partners, to ensure that partners attend work and to control the distribution of profits.

    What will happen if I do not have a partnership agreement?

    Partnership agreements are essential. In the absence of a partnership agreement there is much potential for dispute and disagreement between the partners. Planning ahead avoids disputes and costly court battles later. No matter how much of a friend your potential partner is, you should never enter a business partnership with him or her without a formally drawn up partnership agreement.

    Joint Venture Agreements

    What is a joint venture?

    The term "joint venture" has no specific meaning in English law. It describes a commercial arrangement between two or more economically independent entities. A joint venture can be set up as a limited liability company, a limited liability partnership, a partnership (or limited partnership) or a purely contractual co-operation agreement.

    What is a joint venture agreement?

    The purpose of the joint venture agreement is to establish the basic rights and obligations of the parties in relation to the joint venture, to ensure that the company and its business is established and run in accordance with the participants' objectives and to prescribe, as far as practicable, what happens if difficulties occur.

    Because of the different nature of individual joint ventures, the participants and the business concerned, the detailed provisions of the joint venture agreement vary considerably from case to case.

    What will a joint venture agreement cover?

    • The object and scope of the joint venture.
    • The capitalisation and financing of the company.
    • The composition of the board and management arrangements.
    • Provisions for distribution of profits.
    • Transferability of shares in different circumstances.
    • Provisions for protecting the minority (if any).
    • Provisions for unwinding a deadlock in a 50/50 venture.
    • Provisions relating to the termination of the joint venture.
    • Restrictive covenants on the company and the participants.
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    Terms and Conditions

    Why do I need to have terms and conditions in place?

    A company’s terms and conditions should be the first document it puts into place when starting up.

    You will need to address what your company does, the key processes within your company and its typical customers.

    Terms and conditions are important for a variety of reasons:

    • Written terms and conditions help to create certainty as to the agreement.
    • Written terms and conditions help to minimise legal disputes and the chances of you being taken to court.
    • Written terms and conditions help you to cover all of the important matters and not overlook the things that are less obvious.
    • Written terms and conditions help you to enforce your agreement.
    • Written terms and conditions help you to provide good customer service.
    • Written terms and conditions help to avoid mismatched expectations.
    • Written terms and conditions help you comply with the law.

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