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What do member, shareholder, and partner agreements entail?

Drafting member, shareholder, and partner agreements is crucial to business formation and governance. These agreements outline the rights, responsibilities, and relationships among the parties involved in a corporation, limited liability company (LLC), or partnership.

One example of when corporate executives or boards of directors require counsel on drafting member, shareholder, and partner agreements is when forming a new business entity. Formation is a critical time when foundational documents need to be prepared, including articles of incorporation for corporations, operating agreements for LLCs, and partnership agreements for partnerships.

Another example occurs when a significant change in the structure or ownership of an existing business entity, such as a merger, acquisition, or the addition or removal of critical stakeholders. In these situations, revising the existing agreements to reflect the new circumstances and ensure compliance with Florida and federal law is essential.

Need help with a matter related to the drafting of member, shareholder, and partner agreements? Schedule your consultation today with a top corporate governance and operations attorney.

Which Florida and federal laws and regulations apply to member, shareholder, and partner agreements?

In Florida, the drafting of member, shareholder, and partner agreements follows the governance of the Florida Business Corporation Act (FBCA) for corporations; the Florida Revised Limited Liability Company Act (FRLLCA) for LLCs; and the Florida Revised Uniform Partnership Act (FRUPA) for partnerships. These statutes guide the drafting of agreements, including requirements for the content, format, and execution of such documents.

Additionally, federal securities laws, such as the Securities Act of 1933 and the Securities Exchange Act of 1934, may apply to drafting shareholder agreements for corporations that issue securities. These federal laws establish disclosure and registration requirements and regulations for the sale and transfer of securities.

What are common issues regarding member, shareholder, and partner agreements that lead to litigation?

The following issues are among the most common in litigation involving the drafting of member, shareholder, and partner agreements:

  • Ambiguity or Vagueness: Poorly defined terms or unclear provisions within agreements can lead to disputes over interpretation and enforcement.
  • Breach of Fiduciary Duty: Allegations of directors, officers, or partners acting in their interests rather than those of the company, shareholders, or other members can lead to litigation.
  • Non-Compete or Non-Solicitation Clauses: Disagreements over the scope and enforceability of restrictive covenants may arise when parties seek to enforce or challenge them.
  • Disputes Over Allocation of Profits and Losses: Disagreements over the distribution of profits and losses among members, shareholders, or partners can lead to legal disputes.
  • Valuation of Business or Assets: Disputes may arise over the valuation of a company or its assets, particularly when a member, shareholder, or partner seeks to exit the business.
  • Dissolution or Winding-Up of the Entity: Conflicts may emerge during the dissolution or winding-up process, notably if the agreement lacks explicit provisions addressing the process.

What are effective measures to minimize the risk of litigation over drafting member, shareholder, and partner agreements?

Implementing the following strategies may help mitigate risk:

  • Draft Clear and Unambiguous Agreements: Ensure agreements are written with well-defined terms and provisions to avoid interpretation disputes.
  • Address Potential Conflicts of Interest: Include provisions that address conflicts of interest and outline the fiduciary duties of all parties involved.
  • Consult Legal Counsel: Engage experienced legal counsel to review and provide guidance on drafting agreements, ensuring compliance with Florida and federal laws.
  • Establish Dispute Resolution Mechanisms: Include provisions for mediation, arbitration, or other alternative dispute resolution methods to resolve disputes without litigation.
  • Regularly Review and Update Agreements: Periodically review and update agreements to ensure they remain current with applicable laws, regulations, and the evolving needs of the business.
  • Ensure Proper Communication Among Parties: Encourage open and transparent communication among all parties to the agreement to address potential issues before they escalate into legal disputes.

When a set of facts is appropriate to meet litigation requirements, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

Frequently Asked Questions

  1. What is the importance of having a well-drafted member, shareholder, or partner agreement?

A well-drafted agreement helps establish a clear understanding of each party’s roles, responsibilities, and expectations, minimizes disputes, and provides a framework for resolving conflicts when they arise. It can also facilitate the smooth operation of the business and protect the interests of all parties involved.

2. Can I draft a member, shareholder, or partner agreement without the assistance of a lawyer?

While drafting an agreement without legal counsel is possible, engaging an experienced attorney is highly recommended. An attorney can help ensure that the contract complies with Florida and federal laws, and they can provide valuable guidance on avoiding common pitfalls that may lead to disputes or litigation.

3. How often should member, shareholder, or partner agreements be reviewed and updated?

There is no fixed rule on how often agreements should be reviewed and updated. However, it is advisable to check them periodically, especially when significant changes to the business, its structure, or the applicable laws and regulations exist. The regular review ensures that the agreements remain current and continue to serve the best interests of all parties involved.

Have more questions about governance or operations for your business?

Crucially, this overview of the drafting of member, shareholder, and partner agreements does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.

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