2. Discuss in pairs

65535. The terms of partnership agreement

65535. The partners’ responsibilities and power

65535. Profits and losses

65535. Dissolution of the partnership

3. Get ready to speak in details about how to launch your own business.

V. Written Task

Translate into Russian using a dictionary.

The factor of control

Whether a new business starts as a partnership or corporation, the founders should carefully consider the question of control: the ways and means of maintaining the authority of the founders and protecting their interests in the business.

A number of considerations are involved, such as those framed in the following questions who will be allowed to buy, inherit, or otherwise gain ownership of partners’ or other shares? How do the controlling parties ensure that they retain management and supervisory responsibility? Who might be admitted to the inner circle in the future?

Retention of control involves complex legal questions. These reinforce the contention that a lawyer should help prepare all the basic business documents. The type of business, the methods by which interests may be transferred to others,

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possible restrictions on such transfers, employment contracts – all are important. Particular questions may hinge on interpretations of state laws dealing with restrictions on transfers of shares, on transfers of business control, and on other questions.

Some widely used methods of retaining control include the following:

1. Restrictions on transfers of interest. In general, the law frowns on restrains on sales or on assignments of

business or property rights. But shareholders in a corporation can, for example, agree on a stock transfer restriction. Under such an agreement the other partners or shareholders have the right of first refusal before a business share or stock can be sold to a third party outside the business. Where multiple shares are for sale, the other shareholders can usually buy in proportion to the total number of shares each owns.

Stock transfer restrictions generally appear in corporate bylaws. They are also printed on share certificates. The printed restriction puts a prospective purchaser on legal notice that resale restriction exist.

2. Employment Contracts. An employment contract, or a series of them, between a partnership and its

partners or between a corporation and its officers ranks as another way to retain control of a business. The contract spells out the rights, duties, and obligations of both parties – company and individual. The contract may restrict the individuals’ rights.

An employment contract may have other purposes. It may, for example, help the owner of a business protect patents or inventions with which the employee becomes acquainted. The contract may also provide details on a complicated compensation plan, or protect against competition from the employee should he or she leave the firm’s employment.

3. Voting Rights. As business grow and add employees, shareholders, and others, voting

rights become extremely important. A majority of shareholders might, in a given case, try to assume control by changing the business’ purpose, design, or basic direction. Various kinds of voting restrictions can be used to protect the business operation, among them these:

A corporation may provide for voting and nonvoting stock, for voting rules that ensure that the minority group is represented on the board of directors, and for elections of different directors in specified years.

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Shareholder agreements may require that shareholders vote their stock in a certain way. Shareholders might, for example, be able to vote only for other shareholders for the board of directors. “Outsiders” would be excluded. It should be noted, however, that such restrictions on voting or transfers of shares could inhibit many investors from buying the company’s stock.

Using a voting trust agreement, a number of shareholders may join together to give a lesser number, called the trustees, the right to vote on all the shares. The trustees themselves can agree on how the votes will be cast.

Where state laws permit, the charter and bylaws of a corporation may provide for special requirements on quorums and shareholder votes. For example, a two-thirds majority might be needed to change the business’ bylaws.

A corporation’s bylaw, a partnership agreement, or a shareholder agreement might make arbitration an alternative where disagreements arise. The arbitration option would be invoked in case of a voting deadlock.

4. Buy-Sell Agreements. A buy-sell agreement among the shareholders of a corporation ensures that

the corporation can buy the stock of a deceased stockholder. The estate of the deceased has to sell the stock; the corporation has an obligation to buy. To ensure the corporation’s ability to repurchase such shares, the firm must have a stock retirement program. Under an alternative program, called a cross-purchase plan, other stockholders can buy the shares of the deceased.

Establishing a price for stock to be purchased from the estate of a deceased shareholder may or may not be a problem. If the shares are traded on a regional or national stock exchange, the price quotation for a given day determines the price. In a close corporation, however, the problem of evaluation becomes critical. A mandatory buy-sell agreement always outlines an effective method of determining the price of a share of stock. The methods include the appraisal, the book value, and various other methods.

5. Partnership Buy-Sell Agreement. Under a partnership buy-sell agreement, the estate of a deceased partner has

an obligation to offer the decedent’s partnership interest for sale to the surviving partner or partners. The agreement should specify the terms of the sale. Both the partners and their spouses should sign the agreement. In many cases, life insurance offers the best method of purchasing the partnership interest of a deceased partner.

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УЧЕБНЫЙ ЭЛЕМЕНТ 3 (УЭ-3) BUSINESS AND CONSUMER