Shareholders agreements are complicated documents. A well-prepared agreement will flush out problems before they arise and provide answers to challenges you hope you will never face.
Starting a new business is tough enough and there are so many new challenges to overcome in your first year of business. Creating a shareholders agreement is one of those tasks that can seem daunting and take longer than you thought.
Accountants and other business gurus will always recommend you have a shareholders agreement in place but not many can explain why it benefits you or what it actually does.
Why so difficult
Drafting a shareholders agreement is usually something you would consult with lawyers to organise. At SGM we like to do things differently. Over many years of experience we have developed a way to make it easier and faster to create a shareholders agreement. Our approach means you will actually understand why the agreement protects you and your business.
What normally happens when you see a lawyer to prepare a shareholders agreement is they will onboard you as a client, then will get straight to work preparing a shareholders agreement with a only a few details about you and your business. A week or two later you will then be sent a draft shareholders agreement that will run to about 20 – 25 pages of legalese. After reading the cover email from your lawyer which explains the agreement you will be more confused than when you started the process!
The draft shareholders agreement will contain lots of blank spaces for you to insert information specific to your business. It will also probably include lots of clauses you are not really sure what they do and whether or not you need them at all. It’s not easy to grasp the benefits of drag clauses, pre-emption rights and articles of association without a plain English explanation. It can all seem too complicated and many entrepreneurs put it off or give up as they have more important things to be doing.
We’ve seen situations where the back and forward with the lawyer has lasted over a year to finally agree the shareholders agreement.
Talking and listening
We decided there must be a better way to do this and began work on how to make the process better, quicker and cheaper.
Now, when we advise clients on shareholders agreement, we start by holding a workshop (usually face to face with all shareholders where possible) at the start of the process.
Every shareholders agreement is different. We cannot guess what you will need in your agreement. During the workshop we ask about your business and the short/mid-term goals. Based on the information you give us we will discuss a dozen or more key topics with you that could be relevant to your business.
For each of the dozen topics there will be 3 or 4 typical ways businesses deal with that specific issue. Once you’ve understood the issue and potential solutions you will know if it is relevant to your business. If it is relevant we can spend some time finding the best solution. If the issue is not relevant to your business we don’t need to draft extra unnecessary clauses into your agreement.
Instruction manual
The workshop usually lasts 2-3 hours. We encourage clients to make a decision on every issue discussed during the meeting even if you change your mind after the workshop.
We will send you a 1-page summary of the terms you request to include in the agreement. This summary is our instruction manual for how to prepare your shareholders agreement.
Our aim is to write the instruction manual summary in plain English so you can easily understand all the terms used from the workshop. Only when you confirm you are happy with the instruction manual do we start preparing the agreement.
The agreements we produce are usually 99% correct and rarely ever need any further amendments. As long as no one changes their mind the agreement is ready to sign.
Please contact us if you would like to know more about our services.