Sign on the dotted line and save love

To most couples starting a business together shareholder agreements may sound unromantic but they can save a lot of grief later, writes Brendan Lane

Unmarried couples considering starting a business should not let "love" blind them to the reality of the business world.

They should seriously consider drawing up a formal shareholders' agreement to protect their respective financial positions given the lack of any legal framework governing financial issues for unmarried individuals.

Married couples who are also business partners enjoy a far greater chance of equality in any division of assets than their unmarried counterparts should the relationship break down.

While the law requires consideration of the entirety of the assets of the married couples and considers their contributions to the marriage, an unmarried individual could end up with nothing on the break-up should they not own shares or have any formal contract with the business.

There is no such thing as having a right to share business assets 50-50, or at least no such guarantee that fairness will come into play at a time when emotions run high.

A shareholders' agreement might be of huge consequence to unmarried couples.

Even if one of the parties in a married couple had nothing to do with the business that the other party had developed for, say, 40 years, they might still be entitled to a proportion of it, depending on their contribution to supporting the spouse and family and the total value of their combined assets.

An unmarried individual in the same position would not.

In reality a shareholders' agreement is a good idea for business partners, married or not.

A married co-owner and director of a business may prefer their share of the business on divorce to be governed by a commercial framework rather than subject to the manipulations of their ex-lover or the mood of a Judge.

Clarity on individuals' rights from their business dealings is best sorted up front.

Many divorce cases can require extensive inquiry into the real wealth of one or both parties.

The courts are pressing decisively for more disclosure and the sophistication of forensic practices is now crucial in achieving this.

What this means is that the financial side of sorting out a divorce can take longer and can cost a lot more.

As cohabitation continues to be the preferred option for most people, it is imperative for unmarried individuals to know what their rights and risks are.

Drafting a shareholders' agreement is a relatively painless thing to do which could cost less than €2,000.

The costs of commercial litigation or a contested divorce will come in much higher.

Unfortunately, love doesn't always last forever and, however unromantic, a littleplanning could spare a lot of acrimony and expense later in life.

Brendan G Lane is PRIMA (Personal and Relationship Issues in Management) co-ordinator for Grant Thornton

bglane@gt-limerick.com