The majority of disputes in business relationships arise because the parties have not entered into contractual documents defining their roles, obligations and how the running of a business or relationship is to be legislated for.

In the light of this we always recommend to clients when entering into a business relationship, whether as a partner in a partnership, a shareholder in a company, a shareholding party in a joint venture or a business transaction, to fully negotiate all matters relating to that relationship with the other parties and to commit these to a properly and professionally drafted written agreement. This ensures that the parties to the agreement are fully aware of the obligations on them. Further such a document will assist the parties in the running of the business and their relationship. For example there may be certain mattes which arise which if not provided for in the agreement could lead to the termination of a business or relationship which could otherwise continue. Agreements can legislate for matters which will bring a venture to an end and those which will not do so, with a mechanism for resolving disputes. Such documents will also deal with the purchase by one party of another’s shares in a company or interest in a partnership.

In addition to internal documents regulating the relationship of the parties within a business or venture it is important that a business fully sets out its terms and conditions of business with its clients or customers. This is particularly important if a dispute arises since it has already been provided for in the terms and conditions thus making it more difficult for an errant or non-paying client or customer to argue that he or it does not need to pay monies, perform services or comply with any other obligations.

Call to Action

If you require assistance or advice in the preparation of any commercial documents, we are more than happy to help. Please contact a member of our dispute resolution team on 020 7935 3522 to see how we can help.

Frequently Asked Questions

  • What type of documents can Freemans prepare and advise you on?

    We have expertise and can assist and advise you on a whole range of commercial documents including, but not limited to, the following:

    Company Documents

    • Articles of Association
    • Shareholders Agreements
    • Director’s Service Contracts

    Finance Documents

    • Loan Agreements
    • Debentures
    • Personal Guarantees

    Other Documents

    • Partnership Agreements
    • Joint Venture Agreements
    • Terms and Conditions of Business
    • Supply of Goods/Services Agreements
  • What are a Company’s Articles and what do they do?

    A Company’s Articles generally govern the way a Company is run and managed on a day to day basis.

    Upon forming a new Company, it may wish to adopt one of the standard form Model Articles contained in the Companies Act 2006 unaltered. However, these may not always be appropriate depending on the purpose of the Company and it may be sensible to alter these to accommodate a particular Company’s needs. We will be able to advise you whether Model Articles are suitable and if not, what amendments may need to be made.

    When setting up a Company it is important to ensure that the Articles do not prohibit any acts which the Directors and Shareholders may wish to take.  A Company’s Articles are a public document and inevitably there may be provisions which the Shareholders wish to remain confidential from the public. Accordingly the Articles alone will not therefore normally set out the full relationship of a Company’s Shareholders to each other which the parties may wish to be contained in a private document, such as a Shareholder’s Agreement (see below)

  • Why should there be a Shareholders Agreement?

    A Shareholders Agreement is a separate document entered into between the Shareholders of a Company in their capacity as Shareholders. A Shareholder’s Agreement will control the relationship of the Shareholders in respect of each other; how Shares are to be dealt with (i.e. pre-emption rights), provisions as to meetings, voting rights and any restrictions on a Shareholder selling his shares and leaving the company. A Shareholder’s Agreement can specify that it will prevail over any other conflicting provisions, such as those contained in a Company’s Articles. A Shareholders Agreement is a private document kept between the Shareholders, and does not have to be filed at Companies House or made publicly available. It is therefore suitable for commercially sensitive and confidential terms which the parties do not want to be otherwise disclosed.

    A separate Directors Service Contract can be drafted to legislate the relationship of a Director to the Company.

  • What types of Clauses will I need to consider?

    Most agreements are flexible and can be tailor made to include a variety of clauses to suit the parties needs. As example, these may include the following types of clauses:

    • In a Shareholders Agreement: How are shares to be dealt with in the case of a sale of a shareholder’s existing or creation of new shares. This may involve pre-emption rights and drag and tag along rights.
    • Whether certain disagreements end a Company/Partnership or set out a mechanism for resolving them.
    • Termination rights and obligations
    • Restrictive Covenants (see below)
  • What is a restrictive covenant?

    A restrictive covenant is an agreement by a party not to do something,; for example, not to compete with a person, firm or company after leaving them or otherwise interfere with the business in specified circumstances, for a specified period of time and within a specified geographical area. Restrictive Covenants cannot be implied into a relationship. They must be expressly contained in writing and signed by all parties.

    The specific rules relating to restrictive covenants are very complicated and we strongly advise that you contact one of our solicitors for advice to ensure that any restrictive covenants that may be required are effective and properly enforceable.

  • I trust the people I am dealing with, do I still need these documents?

    We always advise, notwithstanding the length of time you have known someone or your personal relationship with them, that your rights, responsibilities, obligations and liabilities, are set out in a formal professionally drafted document. We have acted in many disputes between family members (such as parent/child, brother/sister) or best friends who have entered into business together without formalising matters in an agreement. The litigation that arises in these cases is inevitably more expensive than the resolution of a matter where the parties can rely on properly drafted documents.

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