Starting a business is filled with excitement and challenge. It’s important to give your business the best start by having key legal documents in place.
We regularly help business owners with these ‘legal foundations’. Here are some of the questions we are regularly asked by people looking to start their own business.
Which ‘Legal Documents’ Should I Consider When Setting Up a New Company?
Depending on the nature of your new company, and the surrounding circumstances, there may be a variety of key legal documents to consider. Instructing a good advisory team early, including lawyers and accountants, can help save time, avoid common pitfalls, and let you focus on running your new business.
As a starting point, here are some of the main documents you should consider when setting up your company:
- Articles of Association (either using the default ‘Model Articles’, or bespoke articles, if necessary)
- Shareholders’ Agreement
- Company books and registers
- Terms of business (e.g. for the supply, or purchase, of goods or services)
- Employment contracts and Employee Handbook
- Commercial property lease or other property agreement under which your Company is to occupy its premises (if applicable).
You may also need further key legal documentation (for example licensing or franchise agreements), depending on the nature of your business. Make sure you consider all of this before incorporating your company.
For a Private Limited Company, What Are ‘Articles of Association’?
Articles of Association are the company’s rules and regulations and generally set out the principles of how the company is to be run. These typically cover:
- Appointing and removing directors
- Calling and holding directors’ meetings
- Rights attaching to shares (to vote, receive dividends, and/or receive capital)
- The restrictions and procedures for issuing and transferring shares in the Company
- Calling and holding general meetings of the company’s members (including voting and quorum).
Every company in England and Wales is required to adopt and maintain a set of Articles throughout its lifecycle. The majority of newly incorporated companies choose to adopt the standard template Articles provided for under the Companies Act 2006 (the Model Articles).
However, they might not deal with the specific requirements of your company.
We would recommend that you regularly review the Articles to ensure that they remain fit for purpose and relevant to your company and its shareholders, particularly when new shareholders are introduced.
What Is a Shareholders’ Agreement, and Why Are They Important?
A shareholders’ agreement can be entered into between the owners of the company to govern their relationship as shareholders. This document is intended to run in conjunction with and often ‘enhance’ the provisions of the company’s Articles.
However, unlike the Articles (which are a public document, readily available at Companies House), the shareholders’ agreement remains a private document between the owners. They tend to contain more detailed and specific personal matters.
A shareholders’ agreement often sets out the processes and procedures to be used and followed if an agreement cannot be reached and/or there is a breakdown in the relationship of the shareholders.
Find out more about Shareholders Agreements and why would you want one.
Do You Have Any Other Tips For a Start-Up Company?
There are no secrets surrounding the time, effort and sacrifice that starting a new business can require.
However, speaking to and building a relationship with good professional advisers (including accountants, tax specialists and lawyers) can really help.
This helps to ensure that your time, effort and sacrifice are well placed and you have the best possible chance of having a successful business. Using their combined experience, and knowledge of the key issues surrounding your company can help you carefully and effectively plan for the challenges ahead.
If you’re looking for advice on setting up a company or on any other business legal advice, please contact our Corporate & Commercial team directly for a no-obligation chat about your options on 0115 9 100 200 or send us an email.
Posted on August 12, 2021