Lifecycle of a Business - Expansion and Exit
BLM's Lifecycle of a Business series captures key elements of a business's growth story - from the highs of formation right through to lows of dissolution. Our experts’ advice and knowledge will help guide you to understand and deal with litigation risks.
Building your business is an exciting time and can often be a very personal journey, even if you are not involved in the ownership structure. However, sometimes the time feels right that your involvement has come to an end, whether as a shareholder, director or otherwise. At this point, stakeholders often realise that the business was not quite created with this purpose in mind and steps were not taken at the formation stage that would assist later down the line. Even if appropriate mechanisms are in place, terms of contracts can be disputed, disagreements can occur and frustrations can come to a head when change is afoot. This is particularly the case after a period of expansion whereby significant capital may have accrued in the business and there are differences in opinion as to how it should be distributed or credited.
It may also be possible that you want to retire from the business but would like to ensure that it remains in capable hands. If this is with a family member then there may be other considerations to bear in mind to ensure that everything is conducted properly and efficiently. Even where it might seem strange to be taking formal legal steps to ensure that an agreement is in place and signed with people whom you trust, it would be unwise to maintain an informal approach otherwise you put yourself and the business at risk should relationships break down or a commercial decision backfires and blame is apportioned differently.
Whatever your expansion and exit strategy may be and however far in the future it may seem, it is important to have a robust plan in place and to take steps sooner rather than later. Otherwise the risk of disputes increases and will only serve to take the focus off the business that has taken such dedication to build.
Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to clients of BLM. Specialist legal advice should always be sought in any particular case.