Hi, I am starting a manufacturing unit that does roofing sheets along with 2 of my school friends. we have been friends for a longtime, but I still want to take all necessary measures legally when it comes to business. One of the friends will be taking care of day-to-day operations and the remaining 2 will be just investors and may help with online related works once in a while. May be online promotions or advertising or website development. Company is already registered and have all approvals required on a friend's name who will be taking care of day-to-day operations. As investors, what legal documents can we prepare to show that we own equal share in the business and share everything loss/gain equally going forward? Please advise Note: The company is registered in Anantapur, Andhra Pradesh
Please clarify if you have registered a "company" or a "partnership".
If it is a company you would already have the details of shareholdings in the documents submitted before the RoC.
These details are contained in the Memorandum of Association and Article of Association of the company.
The Indian Partnership Act, 1932 defines a partnership as a relation between two or persons who agree to share the profits of business run by them all or by one or more persons acting for them all.
The documents that may be required to be prepared are:
Letter of intent or memorandum of understanding which includes details of proposed agreement, preconditions, key obligations etc.
Partnership agreement
Confidentiality agreement
The partnership can be of 4 types
General partnership
Limited partnership
Limited liability partnership and
Public private partnership.
You can discuss with your chartered account on all such further issues.
If company is registered what is your share holding in company
all 3 friends should be directors of the company
shareholders agreement should be entered into among the partners
Shareholders' agreements are not mandatory under Indian law. Shareholders' agreements are binding only on the parties to the shareholders' agreement and as it is a contractual arrangement between the parties.
Dear Querist
as the company has already been registered then all of you should add as a director of the company with all the terms and conditions regarding the income and liability.
A POA with specific clauses will do.
Registered partnership deed is the document
1. You are stating that 'the Company is registered'. It is confusing?
2. There partnership concerns are Firms and not Companies.
3. Moreover, all the terms and conditions are stated in the partnership deed which is required to be registered before starting operation of the partnership firm.
4. It is wrong to have all the approvals in one man's name.
5. Your partnership deed is required to be perused to find out your legal position in the said Firm.
You all need to sign shareholder agreement within three of you according to all your terms and conditions.
you decide to go into business with a friend keep in mind the following.
Business is Business. The problem that comes up when friends do business together is that emotions are already part of the relationship. There needs to be a clear and defining line between business (zero emotions) and friendship.
Write it down. This is a safety precaution that will benefit everyone, have an open conversation (leaving emotions out) and talk about the idea that you want to create into a business, write out a founders contract and sign it. If any disputes comes up this document will be the deciding piece that you both agreed and signed.
Keep working hours. This is a hard one but it will also help separate emotions from the business. Try to make out a schedule that are business hours, during this hours you can talk about the business its problems, solutions and ideas. After this window of time you can talk about personal things and make sure not to bring business conversation into friend time.
Hope it is helpful. I wish you much success.
