Friday, October 19, 2012

Shareholders' Agreements

Great blog post by Rebekah Campbell from Posse with an open and honest discussion of her biggest regret - not having a proper shareholders' agreement in place when she started the business.

We had a half baked agreement when Mike, Jodie and I started Shoes of Prey, though we never actually put that into writing. Fortunately that worked out fine, when any issues around shareholdings came up we were able to work through those and end in a place where we were all happy, but we left that open to some risk. Once we raised capital and involved professional investors in the business we had lawyers draft up a formal shareholders' agreement.

For Sneaking Duck Mark, Mike, Jodie and I put a basic shareholders' agreement together. We didn't involve lawyers in the process, so I'm not sure how well it would hold up in a court if things came to that, but the process of drafting it forced us to all sit down, think through and agree on how we wanted things like vesting to work. Plus the 4 of us knew each other really well and there's a high level of trust that we'd be able to work things through if there was ever a disagreement.

Having agreed to all the main points worked out really well for us at Sneaking Duck. When we raised money for Shoes of Prey we realised Mike, Jodie and I needed to focus more of our time on the Shoes of Prey business and less on Sneaking Duck. Because we'd already agreed how the vesting structure worked, it was easy to adjust our shareholdings and everyone feels that the arrangements are a fair one. This had the potential to be a more challenging process had we not thought things through and agreed to them beforehand.

I couldn't agree more with Rebekah's thoughts on this topic. And if you don't already read it, her blog is well worth subscribing to.

1 comment:

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