Keeping the Keys to the Kingdom: Agreements a Business Should Not Be Without
Charles L. Crouch, III
Chuck’s focus is on general business, transactional, and insurance regulatory matters. His business and transactional practice includes formation and financing of business entities, mergers and acquisitions, and counseling on issues including corporate governance, securities, strategic relations, sales and distribution, intellectual property protection, and real estate. His insurance regulatory practice includes counseling insurance companies, producers, and administrators on insurance regulatory compliance, operations and distribution, and representation before regulatory agencies. Chuck has served as General Counsel to a national property and casualty insurance group and was a managing partner of the Los Angeles offices of two international law firms. He is a past Chair of the California State Bar Business Law Section and a past Chair of that Section’s Insurance Law Committee.
Consider the founder of a startup enterprise or the owner of a mature, closely held business. The business may operate as a corporation, limited liability company, partnership, or joint venture. It may be a developer of groundbreaking technology or operate in the brick and mortar sector. But if the business has more than one equity owner or has a key employee with access to proprietary business information, then the departure of an owner, or that employee, can have a catastrophic impact on the value, competitive position, and even survival of the business unless certain simple safeguards are in place.
This article addresses three types of agreements often overlooked by business owners that, if put into place prior to the departure of an owner or employee, can significantly mitigate potentially catastrophic consequences. War stories abound regarding the aftermath of such events when the rush to market, the demands of running the business, or the desire to avoid legal fees took precedence over the preparation of these agreements. The irony is that each of these agreements may be tailored to meet the needs of a business at any stage of development, can be fashioned to meet any budget, and can be later enhanced as needs require and budgets permit. These agreements are the buy-sell agreement, the noncompetition agreement, and the nondisclosure agreement. 1