Why we SHOULD reinvent the wheel – business agreements and contracts

One of the most irritating cliches I hear is “I don’t want to reinvent the wheel”.

It is a favourite refrain amongst many well-meaning business owners and business advisers who will typically ask for a template for a sale agreement, partnership agreement, shareholders’ agreement or some such thing. One of the worst which gets me upset is a request for a template share option agreement.

Why am I concerned? Well, all of these documents are legal agreements. They are contracts. People fall out and resort to lawyers. An amateur document may not mean what it is supposed to mean or may not fulfil its desired purpose. Indeed it may not be fit for purpose at all and will give lawyers a field day, and an expensive one at that.

Something that is also not considered is that these documents which are legal agreements do not travel well internationally. The law is not the same everywhere. There are different laws of succession, different family laws,and of course different commercial laws and different tax laws The last is why share option agreements which are tax-efficient and beneficial in one jurisdiction may be disastrous in tax terms in another.

I guess this is returning to one of my favourite recurring themes which is that there is no substitute for paid advice from qualified professionals. Some people might think this would be expensive for their clients or themselves, but professional advice up front has great value in being cheaper by far than expensive litigation. Do not be tempted to re-hash someone else’s document for your own purpose. Invest in a bespoke agreement from a specialist backed by someone else’s professional indemnity insurance rather than yours. Sleep easily at night.

© Jon Stow 2009

Comments

  1. Linden Dyason says:

    Jon
    So well said, both in your mass email and your blob—for which many thanks. I have taken the liberty of drawing your mass email and blog to the attention of our new brand image team as they will certainly be interested in quoting you.
    Just yesterday I replied to two separate mass emails requesting templates. This practice annoys me so much because it is a flagrant breach of the IIB Code of Ethics which requires that work for which the Associate is not specially skilled must be not done, or, preferably, must be passed on to an Associate with the required specialist skill.
    Sincerely yours, Linden

  2. I’ve been involved in taxes for longer then I care to admit, both on the personal side (all my working life!!) and from a legal standpoint since passing the bar and pursuing tax law. I’ve provided a lot of advice and righted a lot of wrongs, and I must say that what you’ve posted makes perfect sense. Please keep up the good work – the more people know the better they’ll be equipped to deal with the tax man, and that’s what it’s all about.

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