Case Study - Commercial - A Potentially Risky Business Deal

Moores Legal commonly prepares Shareholders, Partnership & Unitholders Agreements for clients who run businesses with others, and who wish to regulate their relationship. The key discussions for preparation of such agreements often revolve around what to do if there is a falling-out. This includes how interests are valued, sold and the treatment of any third party purchases, together with non-competition or restraint clauses.

Situation:

In mid-2008, Moores Legal was approached to complete a Shareholders Agreement for a client. Upon meeting with the client, it became apparent that the Shareholders Agreement was merely one document that the client had been asked to sign. In fact, the client owned half of a $24m company, and the other shareholder was proposing to sell their shares to another party. This involved a significant degree of risk on the part of the company, and our client who was being asked to bear some of the risk in paying out the leaving shareholder.

Response:

Within the instructions that the deal was desirable, Moores Legal liaised with accountants to develop a dual legal and accounting approach as to how best the deal might be structured.

Within weeks of the first round-table meeting with lawyers and accountants, a problem was identified which resulted in an immediate saving to the client of $40,000.

Moores Legal advocated on behalf of the client, dealing with bank requirements and with the other parties, in establishing forms of security for the client in relation to some of the risk being undertaken.

Outcome:

Importantly, Moores Legal was able to work within what became a very tight timeframe as other parties were keen to proceed, all the while ensuring that the client's interests were protected.

The approach was both a dual approach and a commonsense business approach that was required to draft and review a range of documents including securities.

The deal having been done, this company continues to go from strength to strength and is currently doing better than its own budgeted performance.