New collaboration? Consider your exit strategy
New collaboration? Consider your exit strategy

Collaborate? Take off the rose-tinted glasses and consider an exit scenario

A new collaboration is in the offing. Parties have the best intentions, the mutual relationships are good and expectations are high. Parties view the intended cooperation through rose-tinted glasses.

Nevertheless, when entering into a cooperation, please consider a strategy for separation (exit scenario) and to agree upon this in a (cooperation) agreement. In practice, problems usually arise if the cooperation does not bring the expected result, there is a change of management, personal irritation appears and/or a difference of opinion about the business occurs.

Limited company as a legal form?

The legal form of a private limited liability company (BV) is often chosen for such a cooperation, although the legal form of a partnership may be more appropriate (whether or not with private limited liability companies as partners). Upfront consideration of the underlying corporate structure of the collaboration is therefore desirable.

Conditions in a SHA and/or the AoA?

If parties deem a private limited liability company fit, please include an exit scenario in a shareholders’ agreement (SHA) and/or in the articles of association (AoA). It is advisable to think carefully about this while the mutual relationships are still good in order to ensure that you will not be confronted with unpleasant and time-consuming discussions later. It will not be easy to come to a solution if nothing has been arranged on this point in advance.

Prevention is better than cure

Addressing potential (exit) problems upfront is therefore strongly preferred, especially since there are enough options for advance arrangements. Here are some examples:

  • In family businesses and/or start-ups with friends certification of shares can be a proper manner to avoid problems. In such case, careful consideration must be given to structuring the board of managing directors of the foundation in order to prevent the potential problem from being shifted;
  • Voting rights, profit rights and/or (non-)transferability of shares can be infinitely varied;
  • Specific offer obligations can be established, whether or not these are linked to a quality assurance and/or certain circumstances (such as reaching a certain age) and whether or not they depend on a certain period or deviated price determination (a bad-leaver provision);
  • Parties may also think of a mediation clause or arbitration clause.

Over the years, I have gained extensive experience in guiding and advising on entering into and drafting agreements and various kinds of (international) contracts, in which an exit strategy is also established. I also have a lot of experience with advising and litigating in cases where nothing has been arranged beforehand. From that experience, I know how important it is to put time and energy into concretely establishing agreements for (partial) termination of the cooperation.

Practice shows that it is not a superfluous luxury to be legally assisted in this in order to prevent your involvement in costly and time-consuming discussions or legal proceedings afterwards.

Would you like to know more?

If you would like further information about one of the below topics, please contact me.

  • The legal form to be chosen as a structure for cooperation;
  • The choice between or combination of a shareholder agreement and articles of association;
  • Concrete conditions on an exit strategy; and/ or
  • A dispute in which you are or are likely to become involved in because nothing has been arranged in advance.