Looking for Shareholder Agreement? 

If you are looking to start a company, Your shareholder agreement must be tailored to your business.

A shareholder agreement is a binding document governing the relationship between shareholders in relation to ownership of securities of a company. It provides the basis for corporate governance and set outs the rights and obligations.

Do I Need a shareholder agreement?

A company may either adopt a constitution, the Replaceable Rules within the Corporations Act 2001 (Cth) or a combination of both. Although it may appear that a constitution is sufficient to address shareholders interest, it can be quite general. This is because a constitution primarily centres on the company’s objectives, management and activities, rather than the issues that may arise between shareholders. By entering into a shareholder agreement, matters affecting shareholders can be specifically addressed.

It is recommended a shareholder agreement be negotiated into before incorporation, particularly when parties are able to discuss amicably between each other before issues start arising.

Benefits of a Shareholder Agreement

A shareholder agreement allows shareholders to clearly understand their rights and provide a direction on how they can fulfil their obligations. By being transparent in terms of ownership of securities, prospective investors are likely to find the company more attractive than others as it demonstrates stability genuine value to their shareholders. Additionally, by detailing all the possible contingencies that may be encountered over the course of the company’s dealings in the agreement, it will prevent costly disputes from occurring.

What common features should be included?

• Dispute Resolution Procedures
• Confidentiality Obligations
• Pre-emptive rights
• Drag and tag along rights
• Weight of votes
• Share valuation methods
• Dividend Distribution
• Termination

Conclusion

Before drafting or entering into a shareholder agreement, you should always receive specific legal advice. You can now contact us for tailored legal advice and assistance from our lawyers that suits your company’s requirements.