As a litigator, I am often asked to assist and advice family and owner managed businesses in resolving disputes that come about because of uncertainty of some form another in the basis of the relationship with a counterpart.
The lack of certainty allows each side to adopt what they believe (or at least portray) as being a reasonable position, which is where disputes and conflicts arise which can be extremely time-consuming, expensive and often lead to a less than ideal outcome. So, when I advise newly incorporated or growing start-ups or family businesses, I always advise them to get the building blocks in place before it’s too late and make sure everybody knows where they stand. Whilst all parties enter into business together with the intention of making it a successful joint enterprise, it is absolutely prudent to plan for all eventualities and to ensure that everybody knows where they stand if things don’t go as planned!
That premise stands for both internal relationships and external ones, whether that be with suppliers, customers or landlords. From an internal perspective, one of the most important documents to have as an ‘insurance policy’ is a shareholders agreement, which is a private agreement between a companies shareholders (who are often the directors too) detailing many aspects of how their relationship will work, from the day to day running of their business to the process to be adopted if one of the parties wants to exit the company. Together with bespoke articles of association, a good shareholders agreement can really provide a blueprint for a successful relationship and avoid the uncertainty that leads to disputes.
The same principle applies with regards to the agreements with customers, suppliers and distributors. It is essential that each party knows the basis upon which they are contracting and that is achieved by either having individual contractual agreements documented, or properly incorporated terms and conditions. Ideally, those will be drafted in a way to minimise your companies exposure, whilst ensuring a satisfactory outcome to all concerned.
Similarly, the premises in which a business operates can be one of their most important assets. As such, it is vital that the company has had a chance to fully review and negotiate the lease or other occupation arrangements it is planning and understand the risks and rewards associated with that occupation.
Of course, when a business is in its early stages, it is easy to prioritise other more obvious aspects, particularly when the parties are on the upward curve and assuming that everything will go exactly as planned. However, a small investment of time and money in getting these essential building blocks in place, can save you from huge costs and stress as the business grows, which may damage the very fabric of the business. However, it’s rarely too late to introduce measures to prevent the ‘pain’, so even if your company has been trading for a while, it is worth considering what protections you could put in place now to minimise the risks going forward.