When Business Partners can’t see eye to eye, it may be best to part ways. A Shareholders’ agreement is your insurance cover in such situations…
Fallouts between Partners can take your hard work and venture down with them. We recommend signing a Shareholders’ agreement to protect your interests is such situations
A shareholders’ agreement (SHA) is your best fall-back option in case your business partnership goes bad. Read on to know why and how….
The equity battle that Arunabh Kumar and Prashant Raj (of TVF Pitchers fame) are currently embroiled in, throws light on a very important issue in the startup ecosystem – the Falling out of Business Partners. While a partnership has a 30% better chance of survival (as against sole proprietorships), they also have a failure rate of over 50% (!)
While there is little you can do to salvage a failing partnership, when incorporating a company, we recommend signing a comprehensive Shareholders’ Agreement (SHA) in the first phase of your startup story to protect your rights as well as your business. A crystal clear SHA is the bible of your relationship with your co-founders.
Simply put, it’s a contract:
And what it’s not….
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No. A new shareholder is not bound by the SHA solely by the virtue of joining the company. He or She has to sign and accept the SHA (become party to the Agreement) and only then are its terms and conditions enforceable on the new shareholder.
A shotgun investment firm called Argosy Partners cashed in on the Partnership Fallout saga with the very innovative ‘I hate my partner’ campaign (Check it out here). A well-documented SHA ives a clear view of how the company will function, ensures lesser hassle if there is a fall-out and most importantly, protects the business from going down with the partnership.