Considerations To Include In Your Corporate Documents
Your corporate bylaws, operating agreements, or partnership agreements are the backbone of your business. They will tell you how various disputes will be handled. But often, people don’t look ahead to address things that could come up in the future.
Of course, nobody has a crystal ball, and it’s impossible to account for every contingency that could occur. However, there are certain things that you can anticipate that should be addressed in your business agreement.
Emergencies – Sure, you have provisions for meetings and quorums and how items of business are passed. But how would you do business in an emergency that keeps all of your board of directors, or your managers, or shareholders, from being able to meet? Is there language in your agreement that addresses how the company will operate in an emergency when official business can’t be passed?
Death – What happens when an officer or a shareholder dies? If their interests in the company simply pass to an heir, you could find yourself with a business partner, shareholder or officer, that you don’t want to be in business with. Do your business documents address the company’s ability to “buy out” a person who takes an interest in your company involuntarily?
Your Board – If you have a board of directors, what powers do they have? Many corporate documents give them general powers like “all interests of the company,” but this can be dangerous. Whether you want to be a board-lead company, or one where the board is just supervisory or advisory, you need to make sure it is clear how much power your board of directors has and does not have.
Employee Owners – Many times, especially in small companies, shareholders or equity owners, are also employees. What happens when someone is fired as an employee? Do they retain their interest in the company? Many shareholders may feel that by virtue of their status as a part owner or shareholder, that they cannot be fired from their position as an officer or employee. Your corporate documents should address this.
Duties – especially in smaller companies, joint ventures, or partnerships, the roles of all parties should be spelled out in your corporate documents. If a party is just charged with providing financing for the business, that’s fine—but if you also expect them to be in the office every day, handling daily chores for the business, your agreements or partnership documents should say that.
Disputes – How will disputes be handled? Is there a process for the parties to sit down, such as through mediation, before a lawsuit is filed? And what about suing third parties—can an officer unilaterally file a lawsuit on behalf of the company, or must the board, or shareholders, vote on who needs to be sued? Requiring mandatory mediation may keep your business and its officers out of court.
Don’t leave your business to chance. Call the West Palm Beach business litigation lawyers at Pike & Lustig today.