But our business became our worst nightmare.
Picture the scene. If one thing helped a ‘work from home’ mentality, it was the Covid pandemic; then we all worked from home, and many have never gone back.
Dave, one of the directors, moved to Spain just after we could all move around again and now works from Alicante. He still takes his salary, and last year the three of us paid ourselves a bonus too. He is doing alright, yet, I’m not really sure he is doing any work at all as he seems to be eternally on holiday. You only need to look at his FaceBook feed to see that. And he’s not been to see a client for ages!
He’s also helped himself to cash in the business bank account for some expenses that have nothing to do with the business.
We’re fed up with carrying him. We’ve had a number of heated and unpleasant conversations about his future. Yet our shareholder agreement does not cover this scenario. We want him out but we’re not sure what we can do.
Business start-up
Whether you’ve just started a new venture with a friend or colleague or have been in business for years, trust will be at the core of your relationship; it is very much the glue that brings and holds that relationship and the business together.
So, if trust in a business relationship suddenly disappears or gradually breaks down the impact can be far-reaching. For most, it will be both demoralising and upsetting and for many, it can be really devastating; especially when your business and its finances are compromised as a result.
Consider potential fallouts before a dispute arises
Before you face such a situation, there are things you can and should do to make life easier if the worst comes to the worst. Preparing for any future dispute does not represent a lack of confidence; it is not the same as believing that your relationship will not last. Rather, planning for any possible eventuality is the prudent course.
No matter how long you have known your partner(s) and how strong your business relationship is, disputes can and do arise sadly all too often. When they do, you want to be sure you have a strong and sensible shareholders’ agreement in place. A carefully prepared shareholders’ agreement should not only protect you from the consequences of a fallout but also provide the practical and cost-effective means for achieving resolution of any future disagreements or disputes.
Record your understanding and expectations in a written shareholders’ agreement
The best way to avoid disagreements over who is responsible for what or how your business should be conducted is to clearly set out right from the start what you have agreed, what are all parties’ expectations and the resolution processes to be adopted if differences of opinion or dispute should arise.
Don’t just agree on these matters verbally but record them in clear written form and in a legally binding document so that everyone concerned knows the position from the outset and everyone has a written record that they can refer to when the need arises. A shareholders’ agreement is not a legal requirement, but one prepared by an expert with real experience in this field will certainly make things much simpler, clearer and more straightforward if you should face disagreement or dispute in due course.
Indeed, an effective shareholders’ agreement should provide the framework for resolution. It is relatively inexpensive and can save you a lot of money further down the line.
Consider mediation
If you already find yourself in dispute with your fellow director or shareholder, then don’t immediately turn to litigation. Although when in the midst of a dispute, it can be hard to see a way out, the chances are your dispute can be resolved without having to go to court. Mediation is a really effective way of achieving dispute resolution and, again, is best conducted by an experienced and trained professional.
Seek legal advice as early as possible – FREE thirty-minute consultation
I offer an initial FREE thirty-minute consultation, so you don’t have to wait until you are in the midst of a dispute to seek legal advice. The best way to protect yourself and your business from any fallout is to speak with an experienced and specialist legal professional in advance of any dispute arising or, if one has already arisen, at as early a stage as possible.
Indeed, while it may be the last thing on your mind when embarking on a new business venture, planning for the worst early on will always put you in a better position further down the line. It may even help to strengthen and cement your business relationships from the outset.
Issues arising from a lack of trust can be challenging to overcome but, rest assured, there are steps you can and should take in order to prevent damaging repercussions from any such fallout, to protect your interests and to put yourself in a strong position from which to begin negotiating terms of resolution.
