When establishing a new business venture with trusted colleagues or longstanding friends, it’s tempting to view formal legal agreements as unnecessary bureaucracy. Lawyers hear many variations of the same reasoning: “We’re good friends,” “We have complementary skills and need each other to build a successful business,” and perhaps most commonly: “A shareholders’ agreement is an additional cost we can do without now we are setting up the new business.”

These sentiments are understandable, particularly when capital is tight and optimism runs high. However, as a legal professional who has witnessed numerous partnership disputes, I can assure you that failing to implement a shareholders’ agreement from the outset is a risk no business owner should take.

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