Starting a business with multiple shareholders is an exhilarating adventure. We see it all the time—clients walk through our doors, brimming with excitement about a new business opportunity. Their enthusiasm is contagious, fueled by idealism and the promise of success. In those early stages, the future looks so bright that they often brush aside our advice to set up a shareholders’ agreement.
“What could possibly go wrong?” they ask, readjusting their rose-coloured glasses. But here’s the thing: those glasses tend to come off sooner than anyone expects. Without a clear framework in place, what starts as a shared dream can quickly turn into a tangle of misunderstandings and disputes.
It’s crucial to prepare for the future by establishing clear rules and expectations for how the business will be managed. A shareholders’ agreement serves as a foundational document that can protect both the company and its shareholders in the long run.
While articles of incorporation handle the public side of things, this private contract keeps your business’s internal affairs running smoothly and is tailored to your specific needs. You can kind of think of it as the backstage crew working behind the scenes to ensure the show (your business) goes off without a hitch.
A shareholders’ agreement guards against corporate chaos – spelling out roles and responsibilities so there’s no confusion about who’s doing and entitled to what. And when disagreements inevitably arise—because they will—this agreement acts like a referee, equipped with rules for resolving disputes before they snowball.
Plus, life happens. Shareholders retire, fall ill, or—let’s be real—sometimes they just want out. A good agreement plans for these scenarios, keeping the business steady when the unexpected strikes.
Whether you’re just starting out or your business is well-established, having a shareholders’ agreement is something any corporation with more than one shareholder should have. We’re here whenever you’re ready to take off those glasses.
Robin K. Mann, Associate Lawyer