Time spent periodically reviewing your business organizational documents such as articles of incorporation and other related documents can be time well spent!
Recently a client encountered difficulties when she drafted her own Shareholders’ Agreement without benefit of seasoned legal counsel.
The buy sell arrangements/provisions in the document were at best ambiguous.
Notably, while the Agreement provided for the corporation the right to repurchase the employee’s shares if his employment was terminated, the terms of the repurchase were not clearly spelled out:
- How much?
- When and how paid?
- And so on.
When the client issued shares to an employee, she sent the employee a copy of the (poorly drafted) Shareholders’ Agreement.
But she neglected to gain his signature on the Agreement as a condition precedent to delivery of the certificate.
To make a long story short, we spent a considerable amount of time and money negotiating the purchase the employee’s shares when he resigned.
All of this time and expense could have been easily avoided had the Shareholders’ Agreement been drafted properly and executed.
I’m recommending to all business owners that they have their internal housekeeping paperwork reviewed now, in advance of any problems/issues.
My client could have avoided substantial stress and time and expense had she handled things differently.
This is another example of where an ounce of prevention is worth a pound of cure!
Ohio Venture Association Event
11:30am – 1:30pm
50 Public Square, Ste. 200,
Cleveland, OH 44113