Partner is leaving, is there any common legal agreement that will allow him to return?
We have a company that has three business partners (all of us are liable for whatever happens in the company). One of the partners is temporarily leaving the company as he can't fulfill his duties over a longer period of time but he would like to (potentially) join the company later on again.
To make it official, we would like to write an agreement that we will welcome the partner back to the company if he decides to do so.
Now is there any common template for this kind of agreement? Or is there any specific legal name for this matter that I should search for? I can't really find anything.
Thanks
Partner Legal Founders Agreement Agreements
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Why don't you at least tell us the country which laws govern your partnership? How do you expect this to be answered? – Littleadv 12 years ago
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Sorry, it's in Denmark. I'm more looking into how is this situation handled. – Kraken 12 years ago
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Do they have "limited partnership" in Denmark? I think you should have a lawyer answer your questions, anyway. – Littleadv 12 years ago
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It's very similar and as I said, I'm more looking into the general way of handling this issue. Thanks littleadv anyway :] – Kraken 12 years ago
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In US we tend to use "extended leave of absence" to handle something like that. Not sure what is allowable in Denmark. – Apollo Sinkevicius 12 years ago
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Thanks, that's the closest so far. Will dig into it deeper. – Kraken 12 years ago
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@Kraken, did you ever find any useful answers to this question in your research? – rbwhitaker 11 years ago
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Unfortunately not – Kraken 11 years ago
2 Answers
At least in the US, if you had an LLC or a corporation, you could just have the person's equity stop vesting while he's gone. Unvested equity usually doesn't have many rights. You could allow the company to buy his unvested shares at a very low price if he doesn't return.
At least in the US, I wouldn't have him sell his equity and then have to buy it back since the costs and the tax consequences could be substantial.
First of all, the question is what agreement do you currently have? It sounds like you are structured like a partnership: do you have a partnership agreement?
One easy solution I can think of is a buy/sell agreement. Right now, the partner is leaving the partnership. Presumably the partnership is worth something (you are making or have a prospect of making money). The partner owns a third of it. If they are leaving, they own nothing ... so they should be paid what their lost share is worth. This can be paid in cash, or in a promise to pay in the future.
You can then set up a contingent purchase agreement (option to purchase), which says the partner should be able to buy back into the partnership in the future. You would agree a price (or a formula for a price), for which they could buy a 33% (or whatever you agree) share in the partnership when they come back. The price could be in cash, could be by cancelling the cash they are owned from when they left, or could be in a share of their profits for a certain number of years.
You can figure out the exact amounts ... and I think a sale of their share in the partnership, followed by an option to repurchase their share in the partnership, should do the trick.
[Note: I am not a lawyer, just an experienced business person who has dealt with a lot of lawyers, around the world.]
