Many people think that the law defines all the rights and obligations of a partner to the others, and of these to the company. This kind of thinking is mistaken, as the law allows many issues to be defined by the partners themselves in the Articles of Association.
As a result, both in family businesses and in those formed by partners who chose each other based on affinity, it is common to find very simple corporate documents.
Entrepreneurs tend to view the Articles of Association as mere bureaucracy to be completed before the company can operate, so they pay little attention to its rules. This is understandable. After all, detailing the Articles of Association forces the entrepreneur to consider stressful situations, such as a dispute between partners, or the death of one of them and the subsequent arrival of their heirs.
On the other hand, simplicity will certainly hinder the moment a disagreement arises between partners, such as a lack of a system for resolving ties in corporate resolutions, which can represent a setback for the company. Depending on the corporate structure, a tie can lead to a surprising outcome.
This is the case, for example, of a company with three partners, one of whom holds 50% and the remainder divided between the other two. In this example, the law stipulates that the vote cast by the largest number of partners per head (regardless of their shareholding) prevails;
There is also a lack of rules governing the sale of all company shares. It’s common for partners—typically founders and heirs of a deceased founder—to have differing interests in the company: while the heirs want to sell their stake, the founders want to continue working. The problem is that misaligned interests can lead to disagreements, negatively impacting the business.
And the lack of a rule that allows heirs to automatically join the company, which can turn the company into a game of “one remains.”
The right time to discuss corporate rules is while the partners are on good terms and understand each other. This can be a decisive factor in the company’s continued success and professionalization. Delaying the discussion of the Articles of Association until after a problem has occurred doesn’t work.
By: Cesar Moreno | Article published in Estadão.
