We understand that starting a new business can be an extremely exciting time, full of possibility and with lots of opportunities and potentially fruitful partnerships ahead. However, because the early stages of setting up a company can be such a busy time, we often find that start-ups come to us further down the line seeking help with common contractual disputes. To help you avoid encountering some of the more typical pitfalls you might come across, we’ve put together this short guide to the most common types of contractual disputes and what you can do to avoid them.
Common reasons for shareholder disputes
A scenario we see fairly often is where family or friends have set up a company together, and while all goes swimmingly at first, disagreements that can quickly escalate into a full-blown fall out can happen more easily than you would think. Everything seems and feels all the more personal because of the original nature of the relationship – that being a friendship or a family tie – and it’s because of this very fact that putting together a proper shareholders agreement right at the outset is vital.
Potential problems with commercial property leases
You might be so keen to get cracking with setting up your business premises that you rush ahead and sign a lease on an office or unit without giving the contract provided by your landlord more than a cursory glance. Then, a couple of years in, you decide that you would like to move to different premises – but find that there is no break clause in the lease in order for you to extricate yourself from the contract smoothly. For reasons like this, it’s advisable to seek the help of an experienced commercial property solicitor to cast an eye over the terms of a business lease before signing it.
Issues with supply of goods/manufacturing agreements
Time and again, we see start-ups running into problems when they begin trading, because they have readily accepted the terms of a contractual agreement provided by a supplier that simply doesn’t cover all eventualities. Suddenly, they find themselves struggling to meet customer demand due to consistently late delivery of products from the supplier, or sub-standard goods start filtering through. Don’t let this happen to you: ensure that all contractual documentation is properly checked so that your legal position is as solid as possible. Particularly, if the stakes are high, then it’s best to instruct a commercial lawyer to help you with drawing up and/or checking such agreements.
The absence of Non-Disclosure Agreements (NDAs)
A classic example of where start-ups can stumble in relation to matters of confidentiality is where an ex-employee leaves to set up on their own and becomes a direct competitor, therefore causing irreparable harm to the start-up’s business. This is where the importance of having an NDA drawn up for each staff member cannot be understated, because it will protect confidential information that goes to the heart of your company and will go a long way towards preventing a situation like this from arising.
Final thoughts on common disputes
The above examples are only the tip of the iceberg of some of the more common contractual disputes we see start-ups run into. The key takeaway from this short guide is that having all documentation pertaining to your business in good shape is absolutely crucial. Our team of skilled commercial lawyers are equipped to help you with getting your contracts and agreements right, so that you can enjoy the dream of setting up your own company safe in the knowledge that the legalities and the paperwork are just as they ought to be.
For information on how to solve a contractual dispute read our contractual dispute resolution guide.