Shareholders' agreements that settle the hard questions early
Going into business with others is easy while everyone agrees. A shareholders' agreement records what happens when you don't: someone wants out, an investor comes in, or a shareholder dies or falls ill.
We draft agreements that fit how your company actually runs, in plain English, so every shareholder understands what they have signed.
What a good agreement covers
- Who decides what, and which decisions need everyone's approval
- Funding: how new capital is raised, and what happens if someone can't contribute
- Issuing and transferring shares, including first rights to buy
- Exits: drag-along and tag-along rights, and how shares are valued
- Leavers: what happens when a working shareholder leaves, including good and bad leaver terms
- Deadlock and dispute resolution
- Dividend policy
- Confidentiality and restraints on competing with the company
- Death, illness or incapacity, often backed by insurance
Who we act for
- Founders setting up a new company
- Family companies bringing in the next generation
- Businesses taking on an investor, or giving a key employee shares
- Shareholders reviewing an existing agreement before a sale or a dispute
Shareholders' agreement or constitution?
The constitution sets a company's basic rules, or the Corporations Act 2001 supplies default ones. A shareholders' agreement is a private contract between the shareholders that adds what a constitution usually leaves out, such as leaver terms and valuation.
The two documents need to line up, so we review them together.
Frequently asked questions
Do we need one if there are only two of us? Arguably most of all. With two 50/50 shareholders, one disagreement can stall the company, so agreeing in advance how to break a deadlock matters.
Can we put one in place after the company has started? Yes. It is simply easier to agree terms before there is a disagreement.
How are shares valued when someone leaves? The agreement can set the method, such as an independent valuer, a formula or an agreed price, and whether a bad leaver gets a discount.
What happens if a shareholder dies? Without agreed terms, their shares pass to their estate. An agreement can give the other shareholders the right to buy them, often funded by insurance.
Talk to us about your agreement
Call (02) 9166 3716 or send us an enquiry.
Related reading: What is M&A? · Why you need an estate plan now