Starting and running a successful business in Australia often involves multiple stakeholders, each with their own interests and expectations. To ensure smooth operations and prevent disputes, it’s crucial to have a well-drafted shareholders agreement in place. In this blog post, we will answer some common questions about shareholders agreements.
What are Shareholders Agreements?
Do I need a Shareholders Agreement for my Business?
It is not compulsory to have a shareholders agreement. However, without one, your company will need to refer to the rules in its constitution (if it has one), and the Corporations Act. It’s worth noting that a company constitution often offers a generic framework for all companies, and the Corporations Act provides default rules. Hence, having a shareholders agreement grants you greater flexibility in shaping how your company operates and importantly what happens if one shareholder wants to leave the business.
What Key Elements Should be Included in a Shareholders Agreement?
Essential elements include ownership structure, decision-making processes, management roles, exit strategies, dispute resolution mechanisms, confidentiality clauses, dividend policies, and procedures for shareholder exits and transfers.
Can Shareholders Agreements be Amended or Changed?
As the shareholders have the authority to determine the contents of the shareholders agreement, they can incorporate a provision that specifies the process for amending or changing the agreement in the future. Usually, this provision would require all shareholders to agree before any changes occur.
What Happens If a Shareholder wants to Sell their Shares?
Your shareholders agreement will define the procedure for issuing and selling shares. This is crucial as it can alter your company’s structure and impact shareholder rights. You can include rules such as having to offer the shares to other shareholders before allowing a third party to buy in. An issue or sale of shares will need to be recorded in the Register of Members and with ASIC.
Are Shareholders Agreements the same as a Company Constitution?
No, they are distinct documents. A company constitution applies to the company and all involved parties, encompassing directors, founders, and shareholders. Conversely, a shareholders agreement exclusively addresses the shareholders themselves, without extending its scope to other parties.
- Shareholder agreements set out the relationship between the shareholders and the company.
- Shareholders agreements offer flexibility and customisation, allowing businesses to tailor the agreement to their specific needs and circumstances.
- Shareholder agreements should include a range of key elements to ensure they are effective.
Gladwin Legal are experts in Corporate Law and have extensive experience in advising businesses. If you require assistance in understanding your legal obligations please contact us at or 1300 033 934.