Money, know-how, the distribution of shares, and the departure of a partner. What to consider even before establishing a limited liability company (s. r. o.) to ensure that the joint venture does not end in conflict.
Let’s imagine two partners, one of whom brought money to the company and the other experience and day-to-day management.
The company is thriving today, but the investor wants to withdraw profits, and the other partner needs to finance further growth. They didn’t discuss how to resolve such a situation when they founded the company. The conflict, however, may not stem from mistrust, but from the fact that each partner understood their agreement differently.
A “money for know-how” agreement may seem balanced, but its terms need to be defined more precisely. The term “know-how” can encompass technology, professional expertise, and the expectation that the partner will bring in customers and manage the company. Furthermore, according to Section 59(2) of the Commercial Code, a promise of future work cannot be used as a non-monetary contribution. Therefore, it is important from the outset to distinguish between compensation for work and returns on capital.
Not every good partner has to be a partner in the company. Depending on the nature of the collaboration, it may be more appropriate to establish an employment relationship with performance-based compensation, collaborate through separate companies, contractually license know-how, or, for a financing partner, form a silent partnership.
Even a 51:49 ownership split does not necessarily mean control. As a rule, a majority partner can remove the managing director, but the law requires at least a two-thirds majority of votes to increase the registered capital. With a 50:50 split, on the other hand, there is a risk of a stalemate. Another risk is posed by a managing director authorized to act independently, who could, for example, sell the company’s assets below market value. The ownership stakes remain the same, but the company’s value decreases. It is therefore more effective to establish controls in advance—for example, through regular reviews, approval of transactions with related parties, or joint decision-making by the managing directors—rather than seeking damages retroactively.
The decision to leave is made upon joining. It is not possible to unilaterally withdraw from a limited liability company, and the sale of a share to a third party is permitted only if the articles of association allow it. The agreement should therefore specify who may purchase the share, how the price is determined, and by when payment must be made. Since, according to Section 66c(2) of the Commercial Code, a conflict between a decision by a corporate body and an agreement among shareholders does not render the decision invalid, the agreed-upon rules must, depending on their nature, be incorporated into the articles of association.
After all, it is best to agree on the terms of a separation when both partners still believe they will never need it.
