Partnership agreement forestalls futile disputes

Partnership agreement is an effective way to clarify internal relations of shareholders and to agree on methods of dispute. It is worthwile to draft the partnership agreement already when establishing the company, but it can as well be prepared anytime at a later stage. A partnership agreement is also an useful tool in any change in the company, e.g. by entry of a new shareholder.

What is a partnership agreement?

Partnership agreement is a contract between shareholders and the company, in which the rights and obligations of shareholders, partners and the company are defined, it regulates the mutual relations of contracting parties. There is no special legislation about a partnership agreement in Finnish law. Although general laws of obligations and e.g. Legal Transactions Act will be applied to it. Partnership agreement cannot be against to peremptory provisoins e.g. Companies Act. The agreement often tends to supplement the regulations of the Companies Act and the articles of association and to agree on the modes of operation in situations which are not covered by the law.

What can be agreed in a partnership agreement?

The lack of peremptory provisions about the contents of a partnership agreement makes it possible to customize the agreement to the needs and aims of the company. Typical subjects in the agreement are:

• Aims and purposes of the course of business in the company
• Management of the company
• Decision making
• Contributions of the contracting parties
• Financial liability of shareholders and distribution of profits
• Right of obtaining information about the company matters
• Mode of operation in change of ownership
• Decisions concerning investments
• Prohibition of competition and non-disclosure obligations
• Sanctions for breach of the partnership agreement
• Mode of operation in dispute settling
• Validity and termination of the agreement

What is the advantage of a partnership agreement?

The advantages of a well drafted partnership agreement are reflected in the entire business. One could minimize the potentual disagreements between the shareholders through a partnership agreement and if dissents still occur, ways of solving them are clearly determined. In addition to that the clear-cut mutual division of duties will definitely forestall future disagreements. Also the distribution of company profits is worth planning beforehand.

Is partnership agreement necessary in Your business?

Detailed information in our website. Our experts will be pleased to assist You in any matter relating to partnership agreement.