Any idea that aims to become a business venture must be accompanied by a professional process; for this reason, today we will discuss the partnership agreement.
What we should learn before we can act, we learn by acting.
Aristóteles (Ethics to Nicomaco)
By the latter, I mean laying the foundations of its professional structure, that is, defining the vehicle—or vehicles, let’s be ambitious at least at the outset—on which the entire machinery of any venture can be sustained (production, procurement, sales, distribution, accounting, service provision, remuneration, search for collaborators, financing, etc.), as well as using the tools necessary not only for its daily operation, but also for its periodic adjustment, which should allow it to adapt as quickly as possible to the present and not the other way around, because sometimes, when we look so much to the future, we don’t realize that perhaps the future is nothing more than a present that, when we contemplate it, has become the past.
Many of these tools are usually present from day one, are clearly familiar to us, and we quickly become accustomed to using them to the point that we end up not being aware of them. Others, however, seem less useful to us in the short term, such as a spare tire, until we get a flat tire far from a service area and we don’t worry about them while we are “learning by doing” (hence Aristotle’s quote), perhaps discovering a little too late what their absence means for the viability of our business.
It is well known that we tend to think only about what represents an immediate need, which is precisely why it is called an immediate need, although we are often unsure of what the immediate need is, let alone its scope, something that, incidentally, we also tend to learn by doing, and perhaps there is no other way.
However, although it may not seem so at first glance, everything that surrounds, adorns, improves, and adds value to our project, but also protects it, should always be an immediate necessity, in that it should be there from the start and not have to be invented when it is needed. A wise jurist once said that the best contract is one that, once signed, is kept in a drawer and never needed again, yet without its signature, we would not have been able to accomplish anything. This is an exaggeration, of course, and lawyers are also entitled to it as long as it is used in moderation, but it hides a reality that cannot be ignored: the clearer things are from the outset, the better.
And it is in this same vein that a good agreement between partners stands out, due to its importance and necessity. As mentioned above, it is not a question of drawing up a grand agreement, but rather a good one that reflects what the partners expect when embarking on a project, as recreational sailing, long-distance sailing, coastal sailing, deep-sea sailing, and transatlantic sailing are not all the same. It is not just a matter of having one more document and ticking off the checklist; it is about having opened up a space where everyone has reflected and, from their initial position, reached an agreement on the most important issues, anticipating the most typical situations that may arise in the future and, as if that were not enough, with a “professional” approach, without forgetting the human aspect. How could we? But always, as I say, with a professional perspective that is nothing more than giving a professional meaning to our project. After all, we are not talking about a marriage, a club, a family trip, a Christmas party, or the team of “my loves”; in this case, it is about launching or “setting up” an eminently professional project. All this with the firm determination that only some of the precautions in the agreement should be used when necessary, which is another way of saying, exceptionally.
A typical partnership agreement, which only makes sense when there is a partnership at its core, must first consider who are the parties Something trivial at first glance, but although it may surprise us, it is not always so obvious. since the parties are those involved in the project and therefore need to be identified, not those who “flit” around the project, but those who have something to say and contribute from an industrial (in the sense of “industry” understood as business or economic activity or a set of operations carried out to obtain one or more products or services) or financial point of view. Once we have identified who our partners will be, we must define their capacity and the scope of their participation or involvement and, based on this, assign them a role and regulate the means for exercising it.
Similarly, the agreement must clearly state the purpose of the company, which should make it possible to define the most relevant needs of this society and, therefore, prepare for their fulfillment, reflect on its horizon, both immediate and distant, not necessarily to predict the latter, after all, Columbus did not think he would find a new continent halfway through his journey, but rather to be prepared to make the most of any unexpected developments.
It is clear that the partnership agreement affects society, so the aim is to focus in detail on the operation of this society. What management bodies are provided to the company? Who manages it and why? What powers does the manager have and why? What veto, information, opinion, or resolution rights do others have, without appearing to be interfering or hindering the project? When can they exercise these rights and how? What are the consequences? There are many questions, and many answers, and the aim here is not to exhaust them, but simply to point them out. As in any company, control is essential, but so are its limits.
Financing is also an important factor to consider, including the value of shares, returns (dividends or other), loans from partners, contributions, and, of course, changes in the distribution of partners’ equity interests. It is always important to know what happens when one gradually withdraws or when one acquires a greater role. The sale or transfer of shares (or stocks, which are used interchangeably here) between partners and the value of such transfer to the partners.
The next point is the relationship with third parties, where the consideration is about who can join the project and, if so, under what conditions and at what value. These third parties must respect the partnership agreement or they can act independently. These third parties do not necessarily have to be directly involved in the core of our trust, even though at first glance this may seem advisable. Practice—and the law, of course—would favor this, but it is not always necessary, and it may be advisable to set a time limit.
The way to resolve conflicts, which always arise, is a point that is often overlooked. It is therefore often a critical issue and, curiously, one that is neglected. Success will depend on not creating a procedure that is too complex, which instead of reducing tension could cause it to escalate, and at the same time not “blaming” those involved.
Many other issues may be covered by the partnership agreement, as there is no single format. On the contrary, one of its greatest virtues is its flexibility to include—within the limits of the law—anything that may be relevant to the partners, so it would be impossible to list them all here. However, to conclude, I would highlight the recommendation to always add an “exit strategy,” which is simply the establishment of appropriate mechanisms so that those who do not wish to continue can leave in a way that causes the least harm to themselves, the company, and those who remain, in other words, in the most amicable way possible. after all, no matter how much “professionalism” we have put into our project and despite the fact that it may sound somewhat naive, even if paths diverge, people should remain the most valuable and important asset to be protected.
After all, to paraphrase Hölderlin, “what remains is always founded by people,” and a professional project, with its modifications, its ups and downs, and its ability to reinvent itself, aspires to be permanent.
