As a Mum of two children that I cannot bear the thought of being without, the time has suddenly come when they want to spread their wings. I naively thought this would not happen for a while, but no, they have plans to travel, meet with friends for days on end- the time is NOW!
It occurred to me that similarly, business owners face the same scenario: teaming up with best friends and partners to run the perfect business not ever thinking that they might part company. They may not even want to part company and simply have circumstances forced upon them such as illness, moving country, pitter-patter of little feet…Then the question of splitting up the business or continuing to run the business with someone else rears its ugly head and no one has the answer. This is where it is vital in any kind of partnership to clearly spell out what happens if the unthinkable occurs. It is usually set out in a Partnership Agreement ( in the case of a simple partnership) or Shareholders’ Agreement ( in the case of owners of a limited company). Key areas to think about are:
- Who can the leaving party transfer their share to? Should they offer it first to the remaining partner? If so, how will it be valued?
- If the remaining partner doesn’t want it, can the leaving partner simply offer it to anybody? Even competitors?!
- What happens to property and assets contributed to the partnership? How will they be split, if at all?
- What circumstances will trigger the ‘leaving provisions’? Just external events such as death, illness, moving country or also breaches of the partnership agreement itself?
Whilst these questions may seem morose, they have to be faced-just like my birds flying from their nest. Chances are, you will hopefully never have to face them once you have addressed them, but you will have peace of mind knowing it is covered.