Partner Article

Ensure stakeholder agreements are in place say experts

Company bosses must ensure that they have the right shareholder agreements in place, or risk losing out legally and financially, according to one accountancy and business advisory form.

Clive Owen & Co LLP is encouraging businesses to ensure stakeholder and partnership agreements are signed and up to date in case relationships turn sour and parties end up parting. in worst case scenarios, the firm has seen shareholders leaving and refusing to sell back shares, or only selling at an inflated price.

Nicola Bellerby, a tax partner at Clive Owen’s Durham office, said bosses would often end up switching to paying salaries instead of dividends, a less tax efficient move, simply to avoid declaring dividends to the shareholders they had fallen out with.

She added that it was imperative to have clauses written into agreements to protect businesses – even when families were involved.

“Just like a marriage, it may be all happy and smiley at the beginning but, sadly, relationships can sour and even the best of friends can become bitter and twisted,” she said.

“Paying a salary to avoid giving money to the shareholders you’ve fallen out with is far less tax efficient and can end up costing you in the long run, at the very least by buying shares back at an inflated price.”

By ensuring that all agreements are in writing, it can ensure that any disputes can be easily resolved to protect themselves.

The company recently teamed up with Swinburne Maddison Solicitors LLP and Lloyds Bank to hold a workshop to showcase how businesses could protect themselves before signing agreements.

Martyn Tennant, partner with Swinburne Maddison, said: “We’ve been asked on many occasions to help sort out disputes between business partners when a trauma has occurred. This can be easily avoided with correct planning and organising. Legal costs can also be reduced if steps are taken early and business owners choose a preventative course of action rather than reacting to a problem.”

Damian Wynne, senior manager with Lloyds TSB, said: “The banks are very often involved with these matters and it is important that your bank provides you with support services to ensure your business is protected in the event of a situation occurring.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .