Recent business agreements problems solved
All types of businesses face worries over their business agreements. Have they included the appropriate clauses? Will they be protected under their business agreement in the event of a claim? What is reasonable?
Summarised below are some of our recent cases revolving around business agreements.
We find solutions to these types of problem with business agreements along with many others.
Joint venture business agreements
In almost all joint venture business agreements, the first choice to be made is whether or not a separate legal entity will be established as a vehicle for the joint venture. If it is, it will take the form of either a:
- limited company
- limited liability partnership; or
Alternatively, the companies could enter into a contractual co-operation agreements.
Broadly, the joint four forms reflect varying degrees of integration of the interests of the parties in the joint venture. We discussed the most viable option for the client. Typically, a corporate structure involves the vesting of all trading activities, and assets and liabilities relating to the joint venture operation, in a single vehicle (or its subsidiaries). Alternatively, where the association was purely contractual, there may well be no pooling of assets used by the participants. Therefore, no general sharing of revenues and costs. To ensure that a joint venture worked in the most cost efficient manner, it was fundamental that the right structure was adopted from the outset.
We have recently assisted a client on a joint venture in which it was desirable, for tax reasons, to have a combined structure. In that case, a jointly-owned company acting (as undisclosed agent) for the participants in the joint venture.
One area often forgotten about with joint ventures is what happens when they come to an end. Without considering this, there can be huge tax implications. We are able to draft and negotiate the most commercially viable documents for our clients to ensure that risks are reduced.
We ensured the investment was protected as the business grew and generated value. Our main focus is on privately managed and controlled businesses backed by private funds or by institutional funds such as venture capitalists. We were also able to ensure that one of the most common risks faced by investors and current shareholders was reduced; a lack of power. A lack of power can be a risk to all investors, including SEIS/EIS. Not being consulted on certain key decisions could have a devastating effect on the shareholders and the business. We were able to advise investors and existing shareholders on how to ensure that one shareholder was not able to make all of the key decisions alone. This in turn helped to reduce the costly and unwanted scenario of a shareholder’ dispute.
LLP partnership agreement
LLPs have become increasingly more common and offer certain significant tax advantages.
An LLP agreement should also contain provisions for when things go wrong. For example, the agreement should ensure that if a member is found to be, say, drunk whilst at work, expulsion from the partnership is an option available to the LLP should it wish. Without having that right, terminating any membership could prove more costly than the surviving members may imagine. To ensure that the LLPs risks are reduced when the member should leave, a settlement agreement should be entered into between the LLP and the leaving member.
Business acquisition & share sale agreements
The agreement for the sale of shares or a business involves a great variety of issues. If not properly addressed, can leave you short changed. Our expertise can help you to achieve the best value on sale, reduce taxation liabilities, and understand the protections needed such as the level of indemnities and warranties given or required. We manage the due diligence exercise and secure robust documentation.
Management buy out agreement
We assisted a current director of a company on his purchase of the shares in the company in which he was employed. The company is a large IT recruitment solutions provide that employs more than 150 staff. As part of the buyout, our client did not want to pay for the business in full at completion. We were successfully able to negotiate a deferred payment mechanism by way of a loan note. This meant that our client did not have to pay the full amount of the purchase price at completion.