Potential Issues with 50/50 Share Ownership and How a Shareholders' Agreement Can Help

Starting a business with another person with shares split 50/50 sounds fair, but it can get tricky when you disagree on a crucial matter.

When you're evenly split, you need to agree on everything. And if you can't? Deadlock.

• Decisions Grind to a Halt
  If you want to expand and your business partner wants to cut costs, then the company is in limbo.
• The Business Gets Stuck Too
  Opportunities can slip away and the company may struggle to adapt.
• Increased Tension
  While business may be amicable initially, unresolved disputes can lead to personal and professional tension.

Here is how a well-structured shareholders' agreement can help you:

Defined Roles and Expectations

• Clearly defining roles and responsibilities prevents stepping on each other's toes.

• Setting clear goals helps keep everyone accountable and on the same page.

Exit Strategies

• If things really don't work out, you can have a plan for one shareholder to buy the other out.

• You can also agree on how to value the business if someone wants to leave, so there are no surprises.

Director Decision Making

• • You may wish you appoint a neutral third director or give one specific director a casting vote to break deadlocks.

A shareholders' agreement is about building a strong foundation for your company. It's about having a plan, so disagreements are less likely to derail your successful business or your relationship.

If you want to learn more, the corporate law solicitors at Heald Solicitors are happy to help.