I have many thoughts about family business succession. Here are a few of them:
Author: Murray Gottheil
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Landlord Waivers
Banks financing a borrower operating from leased premises typically ask for a waiver from the borrower’s landlord of certain rights under the borrower’s lease. Landlords typically either refuse to give the waiver, resulting in a reduction of the credit available from the bank, or negotiate the terms of the waiver, driving up legal costs for the borrower, who will usually pay the legal fees for three sets of lawyers – the borrower’s, the bank’s and the landlord’s.
Although very few borrowers do it, the best time for you to deal with this issue is when you sign or renew your lease. When the landlord wants your signature, ask the Landlord to agree to provide a waiver to your bank on reasonable terms whenever you are putting new credit arrangements in place.
Many of you will be familiar with the old saying (sometimes attributed to John Adams and other times to Winston Churchill) to the effect that “if you are not a socialist at age 20, you have no heart, but if you are still a socialist at age 30, you have no brain.”
Let’s say that you represent a 40% shareholder in a corporation. You are reviewing a shareholder’s agreement which says that in certain circumstances (death, disability, termination of employment) your client is required to sell his or her shares at fair market value. So far, so good.
Let me start by saying that I really, really, like accountants. I had deep and valued relationships with a number of accountants when I practiced law, and they were by far my best referral sources. Many became good friends. So, the negative stories which I am about to tell relate to a tiny minority of the accountants who I came across.
Here is a conversation that I had with lawyers from time to time. I would provide in a contract that interest would be payable at 18% if my client was not paid on time.
Over my many years practicing business law I formed some strong opinions. Here are two of them which relate to shareholders agreements:
I only know two things about franchising. Here they are.
While I was practicing law, I often came across clients who operated a successful business that they wanted to franchise. They had the idea that they could sign some agreements and then other people would send them money, with very little effort being required on their part.
Death: My favourite topic in a shareholders agreement.
What I like about the death provision is that it is usually not controversial, especially if the shareholders do not have an inkling about who is likely to die first.
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The Power of Doubt
Back when I was practicing law, I used to say that my greatest skill was doing lunch. I did an awful lot of lunch with some pretty good business development results. I have previously written about how I used my lunch meetings to develop personal relationships. You can read about that here: Eating Your Way to A Great Client Base
During my lunch meetings with potential clients, I often used the power of doubt to sell my legal services.