Over my many years practicing business law I formed some strong opinions. Here are two of them which relate to shareholders agreements:
I only know two things about franchising. Here they are.
While I was practicing law, I often came across clients who operated a successful business that they wanted to franchise. They had the idea that they could sign some agreements and then other people would send them money, with very little effort being required on their part.
Death: My favourite topic in a shareholders agreement.
What I like about the death provision is that it is usually not controversial, especially if the shareholders do not have an inkling about who is likely to die first.
Here is a warning for Canadian business owners and their lawyers. Your plan to motivate and reward your employees may backfire if the messaging is not correct from the outset. There is no better way for an owner to screw up the morale of its most valued employees than to start talking about offering them shares in the company before figuring out exactly how to structure the arrangements.
Lawyers use shotgun provisions in shareholders agreements way more than they should. Good lawyers recognize when the shotgun is not favourable to their clients.
Shotgun provisions in shareholders agreements work on the cake theory.
Canadian Business Lawyers: You may be negligent if you don’t know that:
by Maureen T. McKay and Murray Gottheil
“Happy families are all alike; every unhappy family is unhappy in its own way.”
Leo Tolstoy, Anna Karenina
Resolving a dispute among shareholders of a family-owned corporation is entirely different from resolving a dispute among shareholders who are not related. Professional advisors who want to help resolve disputes in a family-owned business must understand not only that a family-owned business is different and how it is different, but more importantly, must adjust their approach to take those differences into account.