A partners’ agreement sets out decisions, contributions and exit rights. Signing it while the relationship is working prevents the first disagreement from bringing the business to a standstill.
A partners’ agreement should define contributions and roles, decisions requiring approval, profit distributions, the admission and departure of partners, valuation and mechanisms for resolving deadlocks. It does not replace the articles of association: it complements them. Rules intended to bind the company or affect third parties must be included in the constitutive instrument where appropriate.
Key pointThe best time to sign is when everyone still gets along and can calmly discuss money, power, commitment and exit rights. Once a dispute begins, every missing clause becomes an urgent negotiation.
A partners’ agreement and the articles are not the same
The articles of association or company agreement legally organise the company. Argentina’s General Companies Act requires them to address capital, management, meetings, profit distribution and operating rules. They are subject to registration.
A partners’ agreement, by contrast, is a contract among its signatories. Argentina’s Civil and Commercial Code provides that a valid contract binds its parties but, as a rule, has no effect on third parties. A private restriction must therefore be coordinated with the rules governing the SRL, SAS or SA and incorporated into the constitutive instrument where necessary.
If you have not yet chosen a legal structure, our comparison of an SAS and an SRL for a business in Argentina explains how each type can organise control and transfers.
1. What each partner contributes and does
Not every contribution is cash: it may also consist of work, technology, clients or technical expertise. The agreement should describe what is expected from each partner and distinguish three concepts that are often confused: capital contributions, compensation for work and dividends received as an owner.
If an equity interest is granted in exchange for future work, it can vest gradually against time or milestones. This prevents someone from leaving the project early while retaining a percentage they have not yet earned.
2. How decisions are made and deadlocks are resolved
Ordinary and strategic decisions should be separated. Purchasing supplies may be left to management, while taking on debt, admitting a partner, selling an essential asset or distributing profits may require a special majority. A 50/50 company also needs a deadlock mechanism: time-limited negotiation, mediation or a buy-sell formula.
Argentina’s Simplified Corporations Act allows SAS shareholders to define their internal structure, allocate management functions and establish dispute-resolution procedures, including arbitration. A standard template will rarely address every real risk.
3. Future funding and profit distributions
The agreement should anticipate what happens if the company needs cash: whether partners will make further contributions or loans, and what happens when one contributes and another does not. It should also state when profits may be distributed and how much is retained for reinvestment.
No clause may guarantee profits or release a partner entirely from losses: the General Companies Act declares such provisions void.
4. Transfers, new investors and exit rights
An orderly exit may include a right of first refusal for existing partners, tag-along protection for a minority holder, drag-along rights in a full sale and conditions for admitting heirs or investors. The price may be based on financial statements, a multiple, an independent valuer or a reviewable formula.
Valuation cannot become a punishment: Argentine company law invalidates a price that departs substantially from the real value. Transfer restrictions must also suit the company type. In an SAS, restrictions included in the constitutive instrument are recorded in the Share Register.
5. Information, confidentiality and intellectual property
The agreement may establish what information each partner receives and protect clients, processes, code, designs and business strategy. If a trademark, software product or piece of content existed before the company, the documents should say whether it is transferred, licensed or remains the property of its creator.
A non-compete clause should be reasonable in scope, territory and duration. Its purpose is to prevent the unfair use of company information, not to stop someone from working indefinitely.
An example: two partners and an impossible decision
Two friends form a company and each owns 50%. One works in it every day; the other provided the initial capital. A purchase offer arrives and they disagree. Neither can reach the required majority, and there is no valuation formula or exit right: a profitable business is suddenly deadlocked.
Their agreement could have set commitment levels, compensation, time-limited mediation and a buyout mechanism. It would not eliminate the disagreement; it would prevent the disagreement from destroying value.
Frequently asked questions
Does a partners’ agreement have to be registered?
As a private contract, it will generally bind its signatories without registration. Rules that amend the articles or are intended to have corporate effects against third parties must be documented and registered according to the company type.
Can it be signed after the company is incorporated?
Yes. It should also be reviewed when an investor joins, ownership changes, a new line of business is launched or the founders’ commitment changes.
Will a template downloaded from the internet work?
It may provide an initial checklist, but it rarely addresses the company’s particular ownership, roles, assets and risks. Its clauses must also be coordinated with the existing articles.
What happens if a partner breaches the agreement?
The agreement may provide for notice, a cure period, proportionate penalties, a buyout or a dispute-resolution mechanism. The remedy must be lawful, proportionate and capable of being enforced.
Emiliano Sebastián HerreraCo-founder of Herrera & Flamenco Abogados, he advises companies, SMEs and entrepreneurs on employment matters and on the legal organisation of their activities, combining legal analysis with a practical approach to support the running and growth of each project.
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Herrera & Flamenco Abogados · Córdoba, Argentina