Partnership Agreement not done but...

Discussion in 'Growing and Managing a Business' started by Dakle, Jul 30, 2008.

  1. Dakle

    Dakle
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    After a few years of business your partner shows up with a Partnership Agreement and needs to be signed quickly. The fine print makes the majority stock holder ( the partner) able to bind the other stock holders to his decisions.


    What do you do when they ask you to sign it or figure out the buy out number?


    As I see it now I can sign,sell, or refuse to sign. What are the ramifications of my refusal to sign?
     
  2. Nazreen

    Nazreen
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    First of all, let me welcome you to the Business Advice Forum Dakle.

    The worst thing that you would do is to sign the agreement on the spot. When someone asks you to quickly sign a document or agreement, that someone usually has ulterior motives for doing so and it is usually to his/her benefit and not yours. What you need to do in this type of situations is to read the agreement carefully and if possible consult a lawyer just to make sure that your interests are also protected.
     
  3. Fergal

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    Welcome to Business Advice Forum Dakle.

    My experience has always been that there is something suspicious going on when someone is pushing you to sign something or to do a deal very quickly. Like Nazreen my recommendation would be to contact your lawyer / solicitor and get some professional legal advice.

    What country do you live in?

    If your partner is considering selling their share of the business to you, I wouldn't rush in with an offer price, instead ask your partner how much he / she would sell for and work from there.

    Good luck with it and please let us know how you get on.
     
  4. Dakle

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    Thank you for the welcome.

    I live in USA.

    I'm being asked to sell out or sign the agreement.

    Most of the agreement is boiler-plate and makes sense. The place where it seems to be not in my interest is the termination clause in conjunction with the part covering what is binding on shareholders (i.e. the owners). The Shareholder's termination clause has 'with and without cause'. Shareholder's action is controlled by number of shares and not the number of parnters who have shares. This means that person with the most ownership shares can generate a binding action such as terminate at will, change agreements and seat any Director as that person wants. It is interesting to note that the binding actions of the Directors are by majority while owners are by shares.
     
  5. ritajones56

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    Taking all things into consideration, I think you should refuse at this point.
     
  6. Fergal

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    Sounds to me like you need professional legal advice. Ask your legal person to look through the agreement and advise you in the ramifications of it.

    Don't be rushed into anything.
     
  7. Dakle

    Dakle
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    Well a year later with a lawyer an nothing signed. Guess I did not rush into anything.
    Could not come to terms with an agreement.

    New wrinkle is company has stopped issueing paychecks to me while the others are being paid.
    Seems my role changes based on the convience of the company. Am I an employee that is not
    being payed for work being done or am I an owner who may have to do without in order to meet payroll?
     
  8. Fergal

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    Welcome back Dakle, sorry to hear that this issue has not been resolved as of yet. What is your lawyer advising you to do?

    Do you still own a share of the company?

    How can they refuse to pay you, if you are still working there? Surely your lawyer has an opinion as to what you need to do to get paid.
     
  9. Dakle

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    Lawyer is thinking I should just find another job.

    I still own shares of the company.

    I was told that they are not paying because employees get paid before owners.
    I agree with the philosphy but i'm seeing an increase in head count which makes
    me wonder what is going on.
     
  10. Fergal

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    Given that you are a shareholder it is most surprising that you are being left in the dark, on these issues.

    What percentage share of the company do you own?

    Have you invested money in the business?
     
  11. scifi

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    Hi!
    Well here is a suggestion for you....
    1- Read biography of Steve Jobs..
    2-You are owner of the firm and employee too..since you work in the company...
    ownership & company are two seperate entity as per the law....
    So you are also liable to get paid no matter what are the circumstances........
    3- Based on the % of share held by you .check whether you in the category of preference shareholder...in which you are the first one to be paid and paying you should be priority of the company..
    4. Its the high time that you switch over to LLP-limited liability partnership..(This advice is in regard to the very first post )
    do brief updates on the issue asap...:)..we are always there ...:)
     
  12. Dakle

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    Fergel,
    I have 20%.
    Mostly sweat equity.

    ScFi and Fergel,
    Thank you
     
    #12 Dakle, Sep 20, 2009
    Last edited: Sep 20, 2009
  13. Fergal

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    20% is a significant share of the business. If your lawyer is advising you that you should simply get another job, I would strongly suggest that you get a second legal opinion on the issue. I agree with Scifi, you should be getting paid for your work and that 20% share should entitle you to some say in how the company is run.

    Have you spoken to your partners about this? You should tell them in no uncertain terms that you want to be paid for the work you do in the business.
     
  14. scifi

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    ThankYou for your feedback Dakle...
    So you have 20% sweat equity...Ok..well..hmmm..as per my understanding with sweat equity goes on" it is the stock option that an employee gets in return of his favor for working in a company at below market average salary or in some cases for no salary at all...."

    So you have to check your agreement details that you might have signed before getting this sweat equity in the company with your lawyer...Check what are the terms and conditions for which you got the sweat equity....
    Since you have mentioned the term
    , its become very important to refer to those agreement ...Sorry to say, you can not use legal grounds if you have sweat equity in the firm irrespective of the fact that it entitles you to be owner of the company too.....

    But there is another way around it as per general corporate practices guidelines which you can use to your advantage.....
    Since you have 20% share of the company, you can develop pressure on Board of directors of the company to pass a resolution in favor of you otherwise you have full right to use your veto power of 20% share in any decision making process of the company....
    Act wisely..Think Smart.....
    TC.. SCIFI..:)

    let us know your feedback on this..!!!!
     
  15. jumeira123

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    A business adviser may be able to help you on this as they know what to include in the partnership contracts.
     

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