TM Law Solicitor Aidan Squire explains everything you need to know about exit strategies in business, if not in Brexit.
Over the last few months, you may well have become bored, annoyed or just amazed and exasperated at how the Brexit negotiations have progressed (or rather not progressed).
Those of us in business are particularly frustrated by what appears to be the total lack of direction or certainty as we move towards what appears to be a leap in the dark.
But while a delay in the Brexit progress might provide extra time to help find a solution to the UK’s departure from the EU, putting off consideration of an exit strategy is never a good idea in business.
Consider the exit strategy up front in your business venture
Apart from the many differing views as to how our extrication from Europe should be managed, to simply blame the politicians is perhaps a little unfair.
There is also a fundamental problem with the current arrangements between the European states. The fact remains that in the series of treaties that gave rise to the present European economic and political structure scant regard was given to the possibility of one of the European states wanting to leave.
There is no detailed drafting of how the exit should be managed and the matters that should be taken into consideration in allowing the exit of one or more member states.
Humble but prudent businessmen, however, do not leave this problem to chance.
Setting out on a commercial venture – through the vehicle of a company or a partnership – sound legal advice to business owners is that a detailed agreement should be drawn up to govern the relationship between the business partners.
And it should be as much about exit strategy as it is about rules to govern the ongoing interaction between the parties in developing the business.
Differing types of exit strategies to cover all situations
Where there are two owners on a 50 per cent basis there should be a deadlock clause in the agreement. Where the parties consider the break-up of a business for reasons not only based on disagreement, but retirement or death, put and call options will be drafted to enable the remaining shareholder(s) to acquire the outgoing shareholders shares and maintain continuity in the management of the business for those who actually work there.
The terms of the agreement should make it possible, particularly by reference to accountants, to determine exactly how much has to be paid for the shares of the departing shareholder.
A well-drawn shareholders’ or partnership agreement should create something of a pathway mapped out to enable differences to be settled by reference to the value of the company at the time, and the amount/size of share that must be dealt with.
In other words, a businessman advised by a competent lawyer would regard it as essential to make sure that any break-up could be managed by following something that had been agreed between the parties when they were well inclined to one another, and not in dispute – looking forward to what they would hope at that time to be a potentially successful business venture.
Agreements at the start will mean agreement on exit
With hindsight, the question is whether the right people were drawing up Euro treaties, that have an economic element, but indeed should govern and prevent the current hiatus. Perhaps those who are negotiating EU exit terms should be businessmen who are used to negotiating economic matters.
Unfortunately, the businessman and his lawyers can do nothing to assist the Brexit problem – but they can do something to ensure that the business structures that they create have an agreement behind them that not only sets out how the parties are to act within the business, but who has what responsibilities in all aspects of the business.
Getting good legal advice in drawing up these initial agreements will not only set out what commitment each party has but, of fundamental importance, how they extricate themselves from the business in the event of misconduct, bankruptcy, retirement and even death.
Legal Advice for your Business
About TM Law – Specialist Alternative Dispute Resolution Solicitors
Based in Hockley, Essex, TM Law is a small and dedicated solicitors. With many years’ experience, helping business owners and local individuals with matters of dispute resolution, compromise agreements, employment disputes, debt collection, commercial disputes and much more.
As a specialist alternative dispute resolution and litigation solicitors, TM Law will advise on whether disputes should be resolved through Court proceedings or alternative dispute resolution, including mediation. Enabling clients to solve problems quickly, cost effectively and as amicably as possible.
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This blog post was originally featured on this members own blog.