Are you thinking about starting a new business? Are you looking to raise capital by issuing shares? Are you hoping to safeguard the succession of your business? Then you should be thinking about your shareholder’s agreement.
A shareholder’s agreement is a binding legal document that sets out the rights and obligations of the shareholders of a company. When drafted correctly, it provides clear guidance as to who controls the business, how the business will be managed and provide a proper and stable corporate governance framework that will allow you to run your business efficiently. The value of a shareholder’s agreement is that it is able to be tailored very specifically to the individual needs of the business, essentially filling in the gaps left by a constitution.
Some of the questions that can be addressed by a well drafted shareholder’s agreement include:
- Who will manage the business – which decisions will require majority vote? How many directors will be appointed? Will there be a CEO or Managing Director?
- What are the shareholder rights and obligations – If a shareholder, for example, becomes insolvent or breaches a material provision of the agreement, what will be the process and at what price will the company buy back their shares? Will there be drag/tag clauses? Will there be a restraint of trade clause restraining the shareholders?
- How will decisions be made? – Will it be by ordinary resolution of directors or by a special majority?
- Director Appointments – Which shareholder will be entitled to appoint directors and how many can they appoint?
- Delegation of rights to management – How many votes will each director have? Alternatively, will the voting rights be proportionate to their total shareholding?
- How will the issuing, selling and transferring shares be managed – If the company issues new shares to shareholders, what is the process for third party offerings? Will there be shareholder anti-dilution rights?
- What is the dispute resolution process – Will there be a dispute resolution process? What are the timeframes for this?
The Gladwin Legal team can assist with:
- drafting a new shareholders agreement suited to your business’s needs;
- reviewing and amending an existing shareholders agreement;
- advising on conflicts that arise by shareholders or directors;
- advising on share issues and transfers; or
- preparing tailored clauses depending on whether the client is founder or investor.
We have extensive experience in drafting, reviewing and advising on shareholders agreements. If you have any questions, please contact the Gladwin Legal team at or 1300 033 934.