Shareholder Agreements: The Danger of Underfunding
Running a business with partners is rewarding, but it also brings shared responsibilities, including the need for robust planning if something unexpected happens.
A well-drafted shareholder agreement is designed to protect all parties involved in the business, clearly defining the terms of the partnership.
If your agreement lacks sufficient funding, these protections fall apart at the most critical moment.
Consequences of Underfunding
- Several problems can arise when a shareholder agreement is not properly funded.
Consider two owners who build a thriving business and sign an agreement. Time passes, the business grows, and the agreement is forgotten. Then, unexpectedly, one partner passes away.
Learn why funding your shareholder agreement matters and what can happen if it's underfunded.
Author's summary: Underfunding a shareholder agreement can lead to significant vulnerabilities.