Partners’ agreement: today’s decisions before tomorrow’s dispute

Start with what each partner will contribute

A venture may begin with a simple arrangement: one partner provides the funding and another runs operations. Such wording alone does not settle each party’s share of the capital. Good drafting begins by describing measurable commitments, the rights that correspond to them, and the documents that evidence them.

If one of the partners will work in the company, his rights as an owner should be separated from his pay, authority and responsibilities in day-to-day work.

Who decides, and when is agreement required?

Equal ownership does not mean every operational decision needs everyone’s consent. A scope of day-to-day authority can be designed, with material decisions that require specific approvals, such as borrowing, admitting an investor or disposing of a major asset.

These arrangements are tied to the company’s form and the statutory quorum for decisions. It should also be set what reports partners receive and when, so that voting rests on shared information rather than divergent estimates or scattered messages.

Test the agreement at distress or exit

A partner may stop working or wish to sell his stake. The document should address these cases, together with the mechanism for valuation, notice and payment, with regard to the partners’ rights.

For example, two partners own the company equally and disagree on expansion, while the project needs additional funding. Rather than leaving the decision hanging, a defined negotiation and escalation path can be arranged, followed by consideration of deadlock solutions suited to the nature of the project.

Make the documents work together

A dealing agreement organizes the relationship among founders, partners or shareholders, but it does not justify violating the law or the company’s documents. Its provisions are reviewed alongside the articles of association or bylaws, the amendments and resolutions, and the necessary registration procedures.

Before signing, test three questions:

• Does each partner understand his commitment?
• Can the mechanism actually be carried out?
• Does the entry of a new partner require express accession to the agreement?

This review turns an understanding into a workable framework.