We are in the process of early discussions with potential investors to grow our business and want to get some advice on shareholders agreement. It is a family owned business and want to know if we should have a shareholders agreement in place before any investors come on board or should we wait until we agree to terms?

Hi Lisa, it's great to hear your family business growing. I'm not sure the structure of your current business (whether it is a partnership or a company), however, generally a shareholders agreement should be in place as soon as there is more than one shareholder. If a shareholders agreement is drafted prior to bringing on investors it will be more founder friendly and drafted specifically for the needs of the business. However, some investors will insist on amendments to a shareholders agreement or that the agreement be based on their choice of template document or precedent. A business structuring lawyer can draft a shareholders agreement from your perspective for you to provide to investors, negotiate amendments or review an agreement providing directly by an investor and help negotiate founder protections into this agreement. Please let me know if you have any other questions. Anthony

Hi Lisa
Great question. There's a little bit of the chicken or the egg here but I'm certain you should have a draft shareholders agreement in place. You can always fine-tune later post final negotiations.
That's because you and your family need to be clear on what you have and you're offering to external investors. That's not to say you don't know your business but knowing your business and knowing what that looks like to an investor are, of course, two different things. So, you need to be clear on what's on the table and what's not, and what terms you're prepared to accept. Then there's all the legalese and 'what ifs' that need to be considered - internally with your family now (so that means you should already have a family agreement in place) and then the wider implications of bringing in external investors. These take time so it's better to have most of them sorted in advance so preparing a shareholders agreement in advance will raise a bunch of questions you may not have yet considered, and solidify those you have.
In summary, get as much done as you can now, great and small, so you can laser focus on any final negotiations at the time. You don't want to have any, "Oh, wait a minute" moments later after the ink is dry. It will be too late and these easily become the seeds for subsequent shareholder discontent and divorce.
You haven't mentioned what other advice you've received to help you to this point. I expect you've an accountant and lawyer which is great but, with respect, they are rarely enough. All too often we see family businesses, and other companies, not look deeply enough at the bigger picture and the long game, eg the full potential of the business, marketing plan, corporate and team structure, all funding options, individual shareholder needs and the overall exit strategy (a biggie), etc, etc. These aspects seem very objective and business-like and, of course, they should be addressed accordingly. However, they are all ultimately founded on our personal aspirations and emotions.
I trust you're working with advisers who can help you work through all these aspects in a coordinated way. Best wishes.

Hi Lisa, as Anthony has said above, if there are more than 1 investor, there should be an agreement in place, even if it is family. I've seen the results of family businesses without buy/sell agreements in place and something happens, it's not pretty.
You need to at least start the discussion with a business lawyer and show investors that you have that in place, which will strengthen your offering. Good luck with it!