Corporate Agreements

What are Corporate Agreements?

Corporate agreements are an integral part of your company documentation. They are legally binding contracts that summarize strategic arrangements between your company and other parties, such as suppliers and partners.

Corporate agreements outline the terms and conditions, specify responsibilities and resources and protect party interests.

Types of company agreements

Key corporate agreements include:

• Partnership Agreement: A contract between two or more business partners defining the terms and conditions of the partnership. This can include revenue sharing, contributions, and responsibilities.
• Joint Ventures Agreement: A contract between two or more companies that agree to share resources to accomplish a specific goal.
• Stock Purchase Agreement: A contract that grants the right to purchase a company’s stock. It outlines pre-emptive, stock repurchase, first refusal, warrants, and call options rights of all parties.
• Joint Development Agreement: A contract between two or more companies agreeing to jointly promote and/or develop a product or service.

There are also:

• Employment Agreements: These are company agreements with individual employees, freelancers, independent contractors, or subcontractors. (See also: Standard Form Documents)
• Sales Agreements: Also known as sales contracts, these are legally binding contracts that detail the terms of a transaction between buyer and seller. (See also: Customer Agreements)
• Shareholder Agreements: Shareholder agreements are between the company and its shareholders. They iterate shareholder rights and obligations and outline how the company will operate. 

Why is a Corporate Agreement Important for Business Today?

Corporate agreements enable your company to:

• Increase market penetration and generate new revenue streams by accessing new markets, sales channel, and customers
• Share risk associated with costs and liabilities across multiple parties
• Improve operational efficiency with defined party responsibilities
• Save time and resources required to build knowledge and expertise for optimal market operation
• Leverage untapped resources and technologies, shared by the partners, to expand market reach

Why is Corporate Agreements Important for an Event Tomorrow?

Corporate agreements are important for an event tomorrow, as they help:

• Evaluate current and future business ventures
• Leverage your partners’ existing distribution channels, customers and technology
• Evaluate third-party liabilities and contribution and profit (loss) sharing agreement
• Provide supplementary business offerings of your company and its partners to their clients

Pros of Addressing Corporate Agreements

• Reduced risk of disputes by clearly defining roles and responsibilities, contributions, authority, profit (loss) sharing, and pay-outs of each party
• Availability of a dispute resolution processes and penalties for any breach of the arrangement
• Flexibility to add, or remove partners, and change roles and responsibilities
• Increase in market reach via new distribution channels and acquisition of new customers
• Resource saving by leveraging additional resources, technology, contacts, and expertise provided by partners

Cons of Not Addressing Corporate Agreements

• Exposure to legal disputes caused by ambiguities in rights and obligations of the parties
• Restricted opportunities to expand business due to undefined scope
• Increase in inefficiencies as profits (losses) sharing, responsibilities, and contributions are not defined
• Confined ability to vertically integrate your business and achieve economies of scale.

Corporate agreements FAQ

What is the difference between a contract and an agreement?

A contract is a legally binding document that contains specific terms and conditions agreed upon by all parties involved, enforceable by law. An agreement, on the other hand, is a mutual understanding or arrangement between parties, which may or may not be legally enforceable.

What makes a contract legally binding?

For a contract to be legally binding, it must contain certain essential elements: an offer, acceptance, consideration, legal capacity of the parties, and an intention to create legal relations. Additionally, the contract must be free from anything that would make it void, such as fraud, duress, or undue influence.