Get a Shareholders Agreement drafted or reviewed.

Secure your business relationship, protect your investment and keep your business on the right track.

What is a Shareholders Agreement?

Resolve disputes before they arise!

A Shareholders Agreement is a critical document which sets out how your company will be managed and the obligations of the shareholders. Essentially a it is an overarching contract, between the company and each shareholder, that operates in unison with the Corporations Act 2001 (Cth) and the company constitution.

A Shareholders Agreement may be entered into before the business is formed, as the business matures or when a new investor comes on board. These documents are designed to solve the common problems businesses face before they even arise.

Do I need a Shareholders Agreement?

No one goes into business with another holding the view the other person or people are going to do the wrong thing. But life happens.

We could rattle off endless examples of where businesses began in good faith and then ended in distrust, anger or disappointment.

A Shareholders Agreement will, as far as possible, cater for circumstances such as:

  • One shareholder employee retiring and wanting out of the business.
  • Circumstances where on shareholder decides to cease operating in the business, leaving it in the hands of the other while still remaining entitled to dividend distributions.
  • Almost 50% of marriages end in divorce. Do you plan to be in business with both spouses or just the original one you began the business with?
  • The death of a shareholder who is instrumental to the operations of the business.
  • Where one shareholder receives a large offer for their parcel of shares, should the other(s) have the right to sell theirs? Should the other(s) be compelled to sell?

People contact us all the time to ask for assistance with scenarios like the above. The first question we ask is. Do you have a Shareholders Agreement? Most say no. But that’s not because most people don’t have a Shareholders Agreement. Having the obligations of each party documented and the corporate governance processes agreed will no doubt assists individuals in resolving these problems themselves without resorting to lawyers and the Courts.

What is typically contained in a Shareholders Agreement?

A Shareholders Agreement is typically a large and complex document. They cover a lot of different scenarios and provide detailed procedures on how to deal with the eventualities.

A Shareholders Agreement will typically contain provisions:

  • Documenting management responsibilities and clarifying what powers are granted to the board.
  • Setting out which decisions require a majority or unanimous vote before the company can enter into that transaction.
  • Detailing the rights of shareholders to appoint directors.
  • Board procedures and operations.
  • Obligations relating to further funding or capital raising.
  • Grants of pre-emptive rights for shareholders where there are new share issues or transfers.
  • Insurance provisions to cater for the purchase of shares from a deceased shareholder.
  • Mandatory share transfers where a shareholder defaults, goes AWOL or otherwise acts to the detriment of the company.
  • Tag along and drag along rights to facilitate exit strategies.

Reviewing Agreements

Not only do we draft Shareholder Agreements, but we can also review and explain the terms of agreements you have been asked to sign.

When you purchase shares, receive venture capital or start a company with a business associate you may be asked to sign a Shareholder Agreement.

Do not assume this is a standard non-biased agreement. Shareholder Agreements can be heavily biased towards major shareholders simply by adjusting the voting percentages. They may allow a party with more capital at their disposal to seize control of the business. You should always have a lawyer review a Shareholders Agreement before you sign on.

We know tech.

Are you looking for an IT Lawyer that knows tech? Today almost every business is a technology business. Even if you are not on the cutting edge of innovation you are probably entering into business relationships with people who are. If you are not you should be. Helping businesses thrive and reducing transaction costs is at the very heart of any real IT Lawyer.

We know business.

Need a software development lawyer, with IT, business and accounting qualifications? One who spent over a decade running their own management consulting firm? The sort of commercial lawyer that can translate IT to business, business to law and law back to IT? Contact us today and speak to a multi-disciplinary commercial lawyer.

Talk to a lawyer who is designated as a risk and governance professional by the Governance Institute of Australia.

Michael Barber, Fellow of the Governance Institute of Australia.

Are you starting or operating a business with another person and you want to secure the business relationship ?

Contact us for an obligation free discussion about drafting a Shareholders Agreement for your business or reviewing one which you have received.

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