The Strategic Importance of Partnership Agreements

Partners’ agreements are fundamental agreements that establish the basis for cooperation and operation within a company. Although they are not legally binding, they play a crucial role in managing relationships between partners and resolving disputes.

In this article, we will explore in detail what a partnership agreements is and its relevance in the business context.

What is a partnership agreement?

A partnership’s agreement is an agreement between the partners of a company that defines and regulates their responsibilities and roles within the company. It is not regulated by law and it is not compulsory, but it is very common and useful to resolve any type of dispute between the partners. It is recommended when the company is incorporated or when a new investor joins the company, and it is also advisable to sign it before a notary to give it greater validity and protection.

What are the key issues to consider?

Entry and exit of members

This aspect is vital, as it directly affects the financing of the company. Two main situations can be considered: the entry of new investors (forms of entry, specific regulations for large investments, etc.) and the exit of partners (terms of exit, preferential acquisition rights, drag along clause, etc.).

Roles of each partner

Aspects such as the time commitment of each partner, the positions and remuneration of each partner are established. Although this seems logical, it is often overlooked and its absence can cause significant conflicts.

Governance of the company

It is essential to prevent the company from being paralysed by internal conflicts or crucial decisions. Provisions are therefore made for common situations that may arise due to such conflicts.

Non-competition clause

Over time, it is possible that one of the partners may wish to invest in another company. This clause ensures that the partners do not invest in companies with similar activities, thus protecting the interests of the company.

The importance of a shareholders’ agreement in a startup

When a company has grown sufficiently to attract new investors, especially in the initial stages, such as the seed stage, before incorporating the company, in order to include rules that regulate the operation of the company, as well as to protect the continuity of the project.

Subsequently, once the company is incorporated, in the early stage, it is recommended to regulate the permanence and commitment of the partners with clauses such as vesting. In the growth stage, it is likely that work has already been done on the project and that there will be interested investors and a round of investment or venture capital will be carried out.

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There are other types of agreements, such as those with accelerators or incubators, which, upon entering the company, acquire a percentage stake in exchange for their support, so it is essential to incorporate clauses dealing especially with the governance and control of the company.

Also with mentors, who acquire minority stakes in the company in exchange for their services, it is therefore necessary to regulate the mentor’s obligations and responsibilities, as well as his or her relationship with the company.

Finally, if more investment is needed, crowfunding investment platforms are often used. In this case it is also necessary to regulate the entry of investors into the company, as well as to introduce protection and control clauses.

If the investor is an investment fund, a board of directors is usually established, which would include clauses on reserved matters.

In summary, partnership’s agreements are essential to establish a solid basis for collaboration and operation within a company, providing clarity and regulation of the responsibilities and functions of each partner. Their importance lies in their ability to prevent conflicts and resolve disputes effectively.

If you are looking for advice on the creation of business partnership’s agreements or other legal aspects of your company in Barcelona, do not hesitate to contact our tax consultancy in Barcelona. We will be happy to help you on your way to business success.

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