I have not read 50 Shades of Grey, nor seen the film, but I gather one consequence of the very successful franchise has been a boom in the sale of pink fluffy handcuffs.
Imagine, however, a situation in which you and your partner (in this case, think of your co-shareholder) are both handcuffed to the bed (for bed, read your company), but unable to get at each other. These unfortunate and highly frustrating circumstances are analogous to the consequences of a breakdown in relations between the two members of a 50:50 company (or partnership).
If you get into a situation where you and your family co-owner have a serious fall out, some of the legal problems that can arise include:
People setting up in business together don't expect their personal relationships to falter, or their interests to diverge over time. It can be difficult to broach the subject as you begin, or in the early stages of a business, or indeed in an established family business when new family members join who might have a different generational view.
Many family businesses continue successfully without problems, but as lawyers we are often advising clients in circumstances where deadlocks have arisen in the business which the parties cannot resolve, and where they have no agreement in place between them that could help deal with the situation. These can be highly emotional and expensive situations which often do not result in a favourable outcome.
A shareholders agreement will not be able to cover every eventuality, but it can provide a framework for resolution, and some solutions to take the heat out of the situation - a key for the handcuffs if you will.
In a future article, we will look at some of the issues you might want to address in a shareholders agreement.