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If your business is evolving – whether you’re bringing in new shareholders, entering a joint venture, or onboarding a new key partner – it’s likely that you’ll come across the term “accession agreement” (or “deed of accession”). Knowing what these documents are, why they matter, and how to use them correctly can make a big difference to your risk management and business relationships.
For many small business owners, legal documents can seem daunting and hard to understand. But, with clear explanations and the right advice, you can use them to protect your interests and support your business growth. In this guide, we’ll unpack what an accession agreement is, when you might need one, and exactly what it means for your business in plain English – so you can move forward with confidence.
Keep reading to understand when and why you might need an accession agreement for your Australian business, what should be included, and how to make sure you’re meeting all your legal needs.
What Is An Accession Agreement?
An accession agreement is a legal document used when a new party joins an existing agreement between other parties. The most common example in business is when a new shareholder or investor joins a company and needs to become part of an existing shareholders agreement. Rather than rewriting the entire agreement, the new party signs an accession agreement (sometimes called an accession deed or deed of accession) to “join in” and agree to the original terms.
In other words: an accession agreement is your ticket to making sure that anyone new joining your business arrangement is legally bound by the same rules as the original parties – nothing more, nothing less. It’s about keeping things simple, efficient and fair.
What About A Deed Of Accession?
A deed of accession is simply a type of accession agreement. In Australia, a “deed” is a special kind of legal contract with its own formalities – usually, deeds don’t require consideration (value exchanged), but are still legally binding. Accession deeds are often used for clarity and legal certainty, especially with company constitutions and shareholder arrangements.
When Does My Business Need An Accession Agreement?
Most small businesses encounter accession agreements during periods of growth or change. Here are some common scenarios where an accession agreement will come up:
- Bringing On New Shareholders: If your company already has a shareholders agreement, any new shareholders will usually need to sign a deed of accession before they get their shares. This ensures everyone is playing by the same rules.
- Adding New Partners To A Joint Venture: When you’re working with others in a joint venture, a new partner will often join an existing joint venture agreement via a deed of accession.
- Unit Trusts And Partnerships: If your business operates as a trust or partnership with an agreement in place, any new unitholders or partners should be bound by the existing rules through an accession agreement.
- Employee Share Schemes Or Option Plans: New participants in an employee share option plan (ESOP) may need to sign a deed of accession to an existing plan or shareholders agreement.
Think of an accession agreement as a way to keep everyone aligned and avoid disputes down the track – it means you don’t need to renegotiate the terms every time someone new comes on board.
Why Are Accession Agreements So Important?
An accession agreement is about protecting your business and maintaining consistency. Without requiring new parties to sign up to the main agreement’s terms, you risk having different rules apply to different people, or finding that someone can argue they’re not bound by what everyone else agreed. This can lead to misunderstandings, arguments, or even legal risk for the company and other stakeholders.
Key Reasons Small Businesses Need Accession Agreements
- Clarity and Consistency: All parties, old and new, are on the same page. There’s no confusion about obligations, rights, or dispute processes.
- Simplifies the Process: Rather than drafting an entirely new agreement or rewriting your constitution, you can use an accession deed to efficiently include new members.
- Mitigates Legal Risks: Protects against potential conflicts by ensuring that all parties are equally liable and protected by the same legal framework.
- Strengthens Your Agreements: Accession deeds are clear, written statements of acceptance that are admissible in court, making them a robust risk-management tool.
If you’re seeking to build a solid business or bring on more investors or partners, having accession deeds as part of your process is a smart move.
How Does An Accession Agreement Work?
An accession agreement works by having the new party (e.g. incoming shareholder, partner, investor) formally agree to be bound by all the rights and obligations set out in the original agreement. Here’s what typically happens:
- Create or Update The Main Agreement: The original parties make sure their main contract (like a shareholders agreement or joint venture agreement) includes provisions allowing others to join by way of accession deed.
- New Party Signs The Accession Agreement: The new member reviews the main agreement and signs an accession deed – this legally binds them to the full agreement.
- Notice To Other Parties: Sometimes, the original parties are notified about the new joiner for transparency.
- Effective Date: Once signed, the new party is considered a full party to the main agreement from that point forward.
That’s it! You avoid the headaches of renegotiation and keep your document management under control.
What Should An Accession Agreement Include?
While every accession agreement is tailored to the underlying contract, some essentials should never be missed:
- Reference To The Main Agreement: The accession deed should explicitly reference (by name and date) the agreement the new party is joining.
- Details Of The New Party: Names, addresses, and other identifying information for the new member or entity.
- Binding Acknowledgement: A clear statement that the new party agrees to be bound by all terms (including obligations, liabilities and dispute processes) of the main agreement as if they were an original party.
- Confirmation Of Delivery: In many cases, the accession deed confirms that the new party has received a copy of the existing agreement.
- Signatures: Often signed as a deed, which can have different witnessing and execution requirements than standard contracts.
It’s crucial that your accession agreements are drafted carefully and checked by a legal professional to avoid unenforceable or ambiguous terms. Poorly prepared deed templates, or missing out on execution requirements, can cause serious problems if there’s a dispute in the future.
How To Ensure Your Accession Agreements Are Legally Sound
Getting accession agreements right is all about process and compliance. Here’s a step-by-step approach to help you get it right:
1. Review The Main Agreement
Before allowing anyone to sign an accession deed, check that the underlying agreement is current, accurate and includes the required mechanisms for new parties to join. If not, you may need a variation or amendment first. Learn about amending your company’s constitution or updating a shareholders agreement as the initial step.
2. Tailor The Accession Deed
Avoid using generic templates. Accession agreements should be carefully tailored to reference the right agreement, and reflect your commercial and legal realities. Consider getting help from contract drafting experts to ensure precision and compliance.
3. Collect Proper Signatures
Many accession deeds are executed as deeds (rather than a simple contract), which involves specific signing and witnessing requirements – especially for companies. Make sure these are followed to the letter, so the deed is valid under Australian law. For more on how to do this properly, read about valid signatures.
4. Keep Clear Records
Once executed, file copies of the accession deed with your main agreement. All parties – old and new – should have access, ensuring transparency and clarity. It’s also good practice to update your business registers and notify ASIC or your business adviser if your company shareholdings or structure have changed. See our guide to changing company ownership.
What Other Legal Areas Do I Need To Consider?
Using accession agreements in your business is only one part of the legal landscape. As your company grows or changes ownership, it’s important to stay on top of other compliance areas too:
- Business Structure: Are you a sole trader, partnership, or company? Each structure has different rules for admitting new members. Learn more about ABN vs ACN and choosing the right structure for your business.
- Updating Company Registers: ASIC (Australian Securities and Investments Commission) requires companies to keep an up-to-date register of shareholders, directors, and company secretaries. Failing to update records can lead to penalties or compliance risks.
- Australian Consumer Law (ACL): When your business supplies goods or services, compliance with the ACL is essential for dealing with customers and partners fairly.
- Employment Law: If a new shareholder is also your employee, make sure your employment contracts and workplace policies are aligned and up to date. See our guide to employee onboarding.
- Intellectual Property Protection: Bringing in new investors or employees may mean disclosing confidential information or IP. Have the right Non-Disclosure Agreements (NDAs) in place alongside your accession agreements.
- Tax and Accounting Compliance: Changing company structure or memberships may impact your tax obligations. We recommend you speak to your accountant about the implications of new shareholdings, especially around distributions and tax planning.
What Legal Documents Should You Have Alongside Accession Agreements?
As your business brings in new parties or adapts its structure, make sure you have the following legal documents and contracts in place:
- Shareholders Agreement: Sets out roles, rights, and responsibilities among shareholders and is crucial for dispute prevention and good governance.
- Deed Of Accession: Binds any new party to all the terms of an existing shareholders agreement or other key business contracts.
- Constitution Or Company Rules: The rules for running your company, which may also need to be updated or referenced in an accession deed.
- Register Of Members: A legal record of all shareholders or unit holders. Must be kept current under company law.
- Employment Contracts: For new staff or directors, to clarify employment rights versus shareholder rights.
- Confidentiality And IP Assignment Agreements: To protect your business’ confidential information and intellectual property when new people join your team. See our guide to protecting your IP.
The best approach is to have these documents tailored to your business and checked by legal experts, rather than relying solely on generic templates. Every business has unique needs, and small oversights can lead to larger headaches down the track.
What Are Some Examples Of When To Use An Accession Agreement?
If you’re unsure whether your situation calls for an accession agreement, here are a few typical Aussie business scenarios:
- You’re granting new shares in your company to a new investor. They need to become a party to your existing shareholders agreement – this is done via a deed of accession.
- A new partner is joining your joint venture entity, and you want them to be bound by the same rules as the original partners.
- You’re updating your company’s constitution and want to ensure all current and future shareholders are equally bound.
- Adding a new member to a family trust or unit trust that already has a unitholder agreement in place.
In all these cases, an accession agreement is the simplest, most reliable way to bring the new party on board while maintaining the integrity of your existing arrangements.
Key Takeaways: Accession Agreements For Australian Small Businesses
- Accession agreements or deeds of accession are legal documents that bind new parties to your existing business contracts or agreements, like a shareholders agreement or joint venture agreement.
- They help your business maintain legal consistency, manage risk, and avoid renegotiating contracts every time your structure changes.
- Make sure accession agreements clearly reference the main agreement, identify the new party, and include a well-drafted binding clause.
- Proper legal advice is recommended when preparing accession deeds, as errors can make them unenforceable or lead to disputes.
- Don’t forget to update company registers and keep all business documents and compliance obligations up to date as your membership or share structure changes.
- Use tailored legal documents – such as shareholders agreements, company constitutions, and NDAs – alongside your accession deeds for maximum legal protection and peace of mind.
If you’d like a consultation on accession agreements or need support bringing new members into your business the right way, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat. We’re here to help you grow, adapt, and protect your small business in Australia.
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