In the USA, couples protect their assets by signing
pre-nuptial agreements before tying the knot. Pre nups aren't
currently recognised in the UK - something that's currently subject
to much debate in legal circles. But when it comes to business, how
can you protect yourself in the event of a 'divorce'? BDT
Corporate's Terence Healey talks trust, shareholder agreements and
Joy Division.
The standard protection available for business owners comes in
the form of partnership and shareholder agreements. But let me ask
existing small business owners this: what written agreement do you
have between your fellow business partners; and will that agreement
really help you to sort out any disagreements should they
arise?
I reckon the majority of you will answer either "None, but I
trust the other person and there is no need for a written
agreement" or "I do have something in writing and I'm pretty sure
all eventualities are covered, but I can't be 100% sure."
In life we all enter into relationships with other people with
good intentions. For the majority of us the last thing on our
minds is that everything could go wrong - in romance or in
business. Most people working together will naturally concentrate
first and foremost on what is going to drive a business forward
rather than drawing up contingency plans.
But let's look at this another way. You are about to embark on a
venture with someone that could last 20 or 30 years. Think back to
your teenage years and the boyfriend or girlfriend that you first
fell in love with. If you are anything like me that is some
time ago now… You probably thought that this relationship was 'the
one'. Contrary to what your parents and friends told you
nothing could detract from the way you felt.
Remember when you broke up how rubbish it felt having to spend a
considerable amount of time in a darkened room listening to Joy
Division and vowing never to go out with anyone ever again?
Okay, fair enough - that was just me.
Hindsight is a great vehicle for moving forward and learning
from mistakes. With that hindsight I look back at my first
relationship, recognise all my mistakes and know that if I had just
protected myself a bit more I would have been listening to less
"Love Will Tear Us Apart" and more "Alive &
Kicking".
So after opening up that old wound, let us apply the scenario
into business. I think you would all agree that honesty,
integrity and respect are the order of the day. One of my aims in
my professional life is to approach everything with common sense
and gusto. If a business relationship is not working then I
want to be able to exit that relationship in the right way, with a
hand shake, a smile and a genuine wish that the others person's
endeavors will bring them good fortune. Please believe me, that is
not always as easy as it sounds.
Business can have a habit of turning the best of friends into
the worst of enemies. I was once told by a very wealthy and
successful entrepreneur that you should never have a partner and if
you do they should never be an equal partner. In his view one
person always ended up doing the work and that person would become
resentful.
Actually, this particular person did have a partner who held 10%
of the business and for that 10% he actually did do all of the
work. I personally would not have structured the business like that
but it worked for the 90% shareholder. The reason it worked:
everything was clearly agreed and defined up front.
To find out how to put avoid the pain of a business divorce,
check out our guide on drawing up a partnership agreement.