VIC Any kind of clause for a Partnership Agreement ensure my partners pull their weight?

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Jackkolson

Member
9 December 2020
2
0
1
Hi Everyone,

[Background]
I have started a business that i've been running over the past few months and it's been growing well with a very unique product in a big market, to the point where it has attracted an investor. The investor is also in the same industry and has the same sales channels so i can easily dip into their expertise, we discussed that they are going to be partner-investors who will grow the brand alongside myself. So we're drafting the Partnership Agreement and starting a company together (as i've been running the business via ABN) with them owning 40,000/100,000 Shares. I trust that they will put in the work as they've started their own business from nothing to 15m+/yr and they've promised over again that they'll push & distribute the products hard.

[Current Situation]
However, i'm still weary that anything can happen and to me, words are words. They might get complacent to a point of growth (E.g. at 10m/yr revenue) and stop growing the business while i keep marchign forwards. I do acknoledge that partnership agreements are based on trust as well (but let's look away from this point for the moment).

So my question is, in our Partnership Agreement that is being drafted, is there a clause/wording that you would include into the contract to mitigate risk of my partners not contributing now or at a later date? Is there a way i can buy their shares if they do not peform and how will this take place? Is there a performance/responsibility clause that you would put in?

P.S. I will be in contact with a solicitor after the contract is drafted but i would value some outside opinions first. & I had a clause that says that they need to make up 15% of the company's revenue but this is hard to measure if the growth is organic in the long term (hard to pinpoint exactly where each $$ of revenue comes from and who's effort it is)

Appreciate your feedback & advice,
Thnx
J
 

Docupedia

Well-Known Member
7 October 2020
245
24
659
Well, for a start you don't use a partnership agreement when you're incorporating a company. What you're probably considering is a shareholders agreement. To do them properly it's not DIY - especially if you're considering compulsory buy out provisions.
 

Jackkolson

Member
9 December 2020
2
0
1
Well, for a start you don't use a partnership agreement when you're incorporating a company. What you're probably considering is a shareholders agreement. To do them properly it's not DIY - especially if you're considering compulsory buy out provisions.
Yeah apologies, it's going to be a shareholders agreement. I'll be with a solicitor once the draft has been done up by their solicitors but any advice to the situation would be good
 

Rod

Lawyer
LawTap Verified
27 May 2014
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957
2,894
Send us an email of how you see it working and we can turn it into something you can use.

A shareholder agreement is not often the place to have such clauses and a separate agreement is often used. Consider a separate agreement around business performance/bonus shares/profit distribution. May not be as simple as you think.