Entry & Exit Strategies
A partnership or shareholding can be easy to get into however difficult to exit.
The time to plan for exit is at the start of the relationship.
Business partners can decide to part company for a variety of reasons. For example, retirement, death, divorce or illness.
Unfortunately business partnerships and shareholdings can dissolve as a result of disputes between the parties over such matters as control, direction of the business and money.
All these matters should be discussed openly and documented at the time of entering into business together.
If shareholders do not have a Shareholders Agreement then the only way to resolve these issues is to apply to court for orders which may be the appointment of a receiver or liquidator. Not only are these orders expensive to obtain, they dramatically reduce the value of the business.
Without a Partnership Agreement the partners are governed by State‑based Partnership Acts. While not as problematic as companies the same issues of appointment of receivers and reduction in value apply.
While everything is going well, no one thinks there will be a dispute on any of these issues referred to in this article. Sadly experience tells us that is not so.
In the words of Winston Churchill:
“He who fails to plan is planning to fail.”