Most small and medium hospitality businesses thrive on the identities that own them. It’s the personal touch and drive from the owners. It’s the people travelling to dine at the restaurant of the new best chef.
For the owners, it’s important to make sure that each of the business partners does what they’re supposed to. That goes for single owners too, as one day they might get a silent or an active business partner.
Enter the stakeholder agreement
What do you need? A stakeholder agreement of some kind. If the business is a company, then it’s a shareholder agreement. If the business is operated by a trust, then it’s a unitholder agreement or stakeholder agreement.
A unit holder agreement is an agreement which attaches itself to a unit trust. It’s increasingly common to see cafes, restaurants and hospitality businesses use a unit trust as its trading entity. It’s an agreement between the trustee and the beneficiaries (or unit holders) of the trust. It’s important to also include the individuals behind the beneficiaries/unit holders. After all, in hospitality, it’s all about the people. The unit holder agreement can deal with as much or as little as you like.
It’s similar with a shareholder agreement. It binds the company, the shareholders and the people behind the shareholders.
Here’s why a stakeholder agreement is essential
- Companies (and trusts) aren’t people.
- What’s important is the person behind it.
- The constitution or the trust deed only binds the company and its shareholders. The stakeholder agreement can bind whoever you need it to.
- Important where there’s a family trust (or other trust) as a shareholder.
- Define the roles and responsibilities
- Particularly important if you don’t know each other intimately.
- Helps prevent unhappiness later on.
- Can be used to get a non-performing partner to pull their weight.
- Dealing with planned exits
- Keeping the business in the family.
- Set the rules for who else can become a shareholder.
- Dealing with unplanned exits
- Say one of the partners dies or can no longer be part of the business.
- Work out whether a surviving spouse can get involved in the day to day (shudder).