Proper Business Planning Through a Shareholders Agreement

The first stage of a company lifecycle should be filled with optimism and excitement as company founders take the first steps towards realizing their dream of building their own business. Marketing strategy and operations are usually at the forefront of priorities, but an often overlooked area of business planning is developing a shareholder (or partnership) agreement for the founding members of the company.

Shareholder agreements cover topics such as bankruptcy, death of a shareholder, conditions for the sale or transfer of shares and other matters which could be a source of contention for the shareholders (in both initial discussions or when the partners are actually faced with the particular scenario). The failure to include a shareholder agreement in a company’s business plan is therefore understandable, given the agreement’s emphasis on business situations which don’t always mesh with the otherwise upbeat startup phase

However with proper implementation, a shareholders agreement can be introduced during the initial stages of the business plan without jeopardizing any of the enthusiasm and positive energy which is an essential component for a startup company. Pitfalls and setbacks are a regular part of a healthy business and once partners recognize this they can better protect all parties against unforeseen events by engaging in an open dialogue with each other and protecting all parties’ interests through a shareholder agreement.