"All We Wanted was Just a Simple Agreement..."

The material contained in these articles is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

A Cautionary Tale

Bill looked across the garden at Ben and again wondered where it had all gone wrong. A simple business idea to supply the garden with flower pots was fast becoming an uncomfortable examination of his relationship with his ceramic friend. Of course there was the lawyer to blame- wasn’t it little weed who had recommended a written agreement with his fellow shareholder in pots R us/Flobadoba Limited? Wasn’t it Little Weed who had sown those first seeds of doubt? They should have ignored Little Weed- they didn’t need any written agreement, they were old buddies who had shared a pot for longer than Bill cared to remember. Besides, paperwork had never been one of Bill’s strong point- he just wanted to get on with the business.

The problem was that now those seeds of doubt were beginning to take root. Hadn’t Ben been spending more and more time recently in the herb garden experimenting with those unusual herbs? Did they really share the same ambitions or have the same expectations in terms of the business? It was okay for Bill- he was free and single but Ben had a family of flower pots to think about. He might want the young pots to take on the family business one day. As the sun beat down on the walled garden Bill could again hear those words of advice…..

…..be open and objective with each other about your short and long term plans for the business

…..don’t avoid issues- don’t assume they wont apply to you- consider the future and the possibility of disagreement, changes in your personal life, the ways in which you think your interests in the company should be valued, the circumstances in which they should be sold/transferred, the ways in which you try and resolve disputes whether or not you have equal shares in the company.

…..be realistic – nothing is exactly standard and no one shareholders agreement is the same as another. Each one depends on the particular circumstances of the situation and can often evolve during the process of drafting the agreement.

….don’t blame Little Weed if what seemed to be a simple process turns into an expensive and difficult one. The more you have thought through the process before coming to see your solicitor the better.

Remember, there will always be a balance between knowing you have the comfort of a well drafted shareholders agreement as against the knowledge that no agreement can cover every eventuality………..

Oh well thought Bill…flobadobadob

January 2003

For advice on shareholder and partnership matters please contact Follett Stock's commercial team.

Phone Hugh Murrell on 01872 260465
email hugh.murrell@follett.stock.co.uk
or Gavin Poole on 01872 260774
email gavin.poole@follettstock.co.uk
or Katie Ashworth on 01872 247283
e-mail katie.ashworth@follettstock.co.uk