As for any private limited company, the articles of association for a business jointly owned by a husband and wife team must be drawn carefully.
However, before considering what should be in the articles, you should consider the shareholders’ agreement. This document lies, so to speak, on top of the company articles providing a framework of how the owners of the company have agreed to devolve day to day decision making power to the directors.
Once you are happy with the ownership structure, you can consider how the company articles of association tie in to whole control structure.
Matters you may like to consider are:
- should you bring in additional shareholders or directors to change the dynamic of decision making?
- how should disagreement and deadlock be resolved?
- should one of the couple have slightly more shares so as to be able to make the decision?
- should both owners also be directors?
Important areas to consider next are: remuneration, dividend policy, quorums, holding meetings and passing resolutions.
Consider your exit strategy if your personal relationship sours
If at some distant time you choose to live apart in your personal life, this need not affect your business. But of course, it probably would do so.
You can decide now about which of these options to pursue or you can leave them as open choices with no present provision. However, you should plan for exit, whether intentional or not.
One of you transfers their shares to the other at zero cost
The company remains as a going concern, but with changed control. Issues to consider here are that the business is not only an asset, but also a source of income.
It might be possible to give all the shares to the other, but put in place an agreement to share profits for a certain number of years.
The company buys back the shares of one of the parties
This can be controlled in your shareholders’ agreement, where the company is a party. Valuation formulae can be included.
Sell the company to a third party
This would be at arm’s length. Perhaps the husband and wife might be able to join the bidding in order to make sure the price is an open market one.
However, a quick sale at the same time that you are going through a breakup might not lead to the highest price for the company being realised.
Wind up the company
This would definitely be a last resort, as it benefits neither party to stop the business entirely.
Relevant documents
Net Lawman has drawn a set of articles of association that can be edited for a company owned by a husband and wife.
The basis of the document is to provide as many reasonable checks and balances as possible. You should also look at putting in place a shareholders’ agreement as mentioned above.