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When your Australian business is growing, negotiating contracts, or navigating structural changes, you’ll likely encounter the term “deed of consent.” You might be asked to get one – or wonder if a new business partner needs to sign. But what exactly is a deed of consent, why do they matter, and how do you use them the right way?
Whether you’re raising capital, onboarding a key investor, entering a partnership, or restructuring your company, deeds of consent are a practical tool for managing risk and keeping everyone on the same page. Yet, misunderstandings about them are common, and missing this step can mean headaches down the road.
In this guide, we’ll demystify the deed of consent for Australian companies, explain when they’re required, and show you how they fit into your broader legal toolkit. By the end, you’ll see why having clear, properly drafted consents could save your business from costly disputes – and how Sprintlaw’s experts are here to help if you need guidance.
What Is a Deed of Consent?
Let’s start with the basics. A deed of consent is a formal, legally binding document where a party agrees to something and acknowledges their understanding of particular rights and obligations. Deeds are a specific category of legal instrument different from simple contracts; they must be signed and, in many cases, witnessed. They are used where additional formality or certainty is required to bind someone to an agreement or set of terms.
In the context of Australian companies, a deed of consent typically records that a person (such as a new shareholder, incoming director, or investor) agrees to be bound by existing agreements. This could include a Shareholders Agreement, Unitholders Agreement, or other foundational company documents.
This isn’t just a box-ticking exercise. Having a deed of consent in place ensures that everyone involved – including new joiners – are legally tied to your company’s key documents and rules. It helps lock down expectations and obligations, reducing the risk of future disputes.
Why Do Australian Businesses Use Deeds of Consent?
Deeds of consent are not just a legal technicality – they’re about practical business protection. Here are some real-world scenarios where a deed of consent plays a key role:
- Welcoming New Shareholders: When your company brings on a new shareholder, you want to make sure they understand and accept existing rules – like your company’s Shareholders Agreement. A deed of consent means they have agreed in writing to be bound by those terms, preventing future misunderstandings.
- Onboarding Directors or Officers: If someone joins your board, you might want them to sign a deed of consent to acknowledge duties under your company’s Constitution or other board policies.
- Unit Trusts & New Beneficiaries: In a unit trust structure, when new unitholders are added, a deed of consent can ensure they accept the existing Unitholders Agreement and any trust deed provisions.
- Franchises or Partnerships: Deeds of consent can also apply if you operate as a franchise or in a business partnership, especially when the business structure or key agreements change.
- Corporate Transactions & Investments: When raising capital or selling shares, investors or acquirers may require existing members to sign a deed of consent to acknowledge changes or waive certain claims.
Think of it this way: whenever a new person comes into your business or company and needs to be formally bound to the documents, a deed of consent is the safest way to ensure it’s done properly.
How Does a Deed of Consent Work?
A deed of consent is more than just a signature page. It will usually:
- Identify the person giving consent (the “consenting party”)
- Refer to the main agreement(s) they are agreeing to (such as a Shareholders Agreement, Unitholders Agreement, Partnership Agreement, or Constitution)
- State that they “agree to be bound by” those terms as if they were an original party
- Include a section acknowledging any special obligations, responsibilities, or consequences (like dispute resolution, confidentiality, or restraint of trade)
- Set out the effective date and specify how the consent continues or might end
For deeds to be valid in Australia, there are special requirements – often, they must be signed in a specific manner and may require witnessing (sometimes under section 127 of the Corporations Act if it’s a company). Getting this right is important for enforceability.
When Does My Company Need a Deed of Consent?
If you’re a founder or company director, you might wonder: “Do I really need a deed of consent every time someone joins the business?” Here’s a quick way to assess:
- Are you accepting a new shareholder or investor? Nearly always, yes – a deed of consent is required for them to be bound by the Shareholders Agreement.
- Is your business bringing in a new director, key employee, or partner into an agreement? A deed of consent may be needed to bind them to any agreements or policies that apply to their role.
- Are you changing business structure (e.g., converting to a different type of company) and want all stakeholders to agree? This can also call for a deed of consent.
- Have you recently updated key documents, and now need everyone’s formal acceptance? A fresh deed of consent could help “re-set” the consensus.
In short, when someone is joining an existing group covered by a contract, and you need complete certainty they are legally bound to its terms, a deed of consent is best practice.
What’s the Difference Between a Deed of Consent and a Contract?
Great question. In Australian law, deeds and contracts are both binding, but there are some key differences:
- Formality: Deeds are more formal than contracts and often require witnessing. They’re typically used where there is no exchange of value (no “consideration”), but you still want a binding commitment.
- Intent: Signing a deed shows a special intention to be legally bound, even in the absence of direct payment or exchange (for example, someone “consents” without necessarily receiving a benefit right away).
- Use case: Contracts are often used for everyday business arrangements (like hiring a supplier or engaging a consultant), while deeds are reserved for special situations where added legal weight is wanted – like consents, guarantees, or waivers.
If you’re not sure what your specific situation calls for, here’s a helpful guide on the difference between deeds and agreements.
Legal Compliance: What Laws Cover Deeds of Consent in Australia?
Deeds of consent are anchored in key areas of Australian corporate and contract law. As you prepare or sign a deed, keep the following in mind:
- Corporations Act 2001 (Cth): Governs company structures and how documents must be executed, especially section 127 (which covers who can sign and witness for companies).
- Common Law Principles: Deeds must meet formal requirements (proper execution, clear identification of parties, and clear intent).
- ASIC Best Practices: The Australian Securities and Investments Commission recommends greater clarity and formality for core company documents, including consents.
- Australian Consumer Law (ACL): For some arrangements, especially where changes affect customer rights or obligations, consumer protection laws need to be kept in mind (see our Australian Consumer Law guide).
- Privacy Act 1988: If your deed of consent relates to handling personal information, you must also comply with privacy obligations (find out more in our Privacy Policy explainer).
The bottom line: a poorly drafted or executed deed may not stand up in court – or worse, leave you exposed. That’s why it’s worth getting these documents checked by legal experts before signing or relying on them.
What Other Legal Documents Might My Company Need?
While a deed of consent is powerful, it’s usually just one part of your legal toolkit. Here are some other essential documents most growing Australian businesses and startups should consider:
- Shareholders Agreement: Spells out the rights and responsibilities of shareholders, covering decision-making, dispute resolution, exit procedures, and more. Essential before bringing in new shareholders – each new member should sign a deed of consent to be covered.
- Unitholders Agreement: For businesses structured as trusts, this agreement performs a similar role to a shareholders agreement, and again, consents may be needed for new unitholders.
- Constitution: The rules that govern your company. New directors or shareholders may need to formally accept this document.
- Employment Agreement & Workplace Policies: When hiring staff, set out their entitlements, expectations, and workplace rules. (See our tips on employment contracts.)
- Non-Disclosure Agreement (NDA): Protects confidential information when working with external parties, suppliers, or discussing a major deal.
- Service or Supply Agreements: For any business-to-business dealings, detailed terms reduce risk and clarify responsibilities for all sides.
- Privacy Policy: Required if you’re collecting customer data online or offline in Australia – see our simple guide to Privacy Policies.
Depending on your structure and industry, your legal needs might differ. You won’t need everything at once – but as your business grows or changes, updating and expanding your contract suite is wise.
How Do I Create and Use a Deed of Consent?
Here’s how a typical process works for most Australian companies:
- Identify the Need: Are you onboarding someone new or making a change to company control? That’s when to start.
- Prepare a Draft: Reference the relevant agreement (Shareholders, Unitholders, Constitution, etc.) and make clear that the new person “agrees to be bound by” its terms.
- Check Execution Requirements: For most companies under the Corporations Act, execution should be done under section 127 – with two directors or one director and a company secretary (for companies with more than one officeholder).
- Witnessing and Signing: The correct witnessing procedure matters. A deed not validly executed may be unenforceable.
- Distribute Final Version: Each party should receive a copy, and your company records should be updated to note the new party formally joined via the deed of consent.
It’s easy to get this wrong if you rely on templates, because a proper deed of consent needs to reflect your exact agreements, parties, and business structure.
If you’re unsure, have a contract lawyer review your document. This investment up front can prevent large disputes or enforceability issues later.
Common Deed of Consent Use Cases in Startups and SMEs
If you’re running a startup or small-to-medium business, here are the most common situations where a deed of consent is recommended:
- New Co-Founders: As your founding team expands, new co-founders should sign a deed of consent confirming they agree to your original Shareholders Agreement.
- Raising Capital: When you close a funding round, incoming investors are usually required to execute a deed of consent to existing investor and shareholder terms.
- Changing Company Structure: If you restructure (e.g., move to a dual company structure or set up subsidiaries), deeds of consent ensure existing and new participants are equally bound.
- Business Acquisitions: New owners or investors may want everyone else to formally acknowledge waiving certain claims or accepting new terms – again, covered by a deed.
- Expanding a Trust: For startups held in unit trust structures (common in Australia), deeds of consent are used whenever new unitholders join.
In each situation, the goal is clear communication and enforceable agreement. Missing or poorly drafted consents are a common cause of future disputes – sometimes even putting acquisitions or investment rounds at risk.
Can I Download a Deed of Consent Template and DIY?
We understand the temptation to download a template to save time and money. However, deeds of consent are documents where the details count – like making sure the parties and agreements are described correctly, and the execution formalities match your company’s structure.
Using a generic template can leave gaps or leave out mandatory elements under the Corporations Act. If you want to be sure your company is protected, the best approach is to have an experienced business lawyer draft – or at least review – your deed to make sure you’re covered.
Key Takeaways: Deeds of Consent for Australian Businesses
- A deed of consent is a formal way to have new parties to your business or company agree to and be bound by existing agreements.
- They are most commonly used for incoming shareholders, directors, unitholders, and key stakeholders – especially when there are important existing agreements such as Shareholders or Unitholders Agreements.
- Deeds of consent require precise wording and proper execution to be enforced under Australian law. Sloppy or inaccurate consents may not be valid.
- Don’t rely solely on templates – consult a legal expert to ensure your deed covers all necessary obligations and matches your company’s needs.
- Keeping your consents and agreements up to date is crucial as your business grows and changes, helping you avoid future legal trouble or disputes.
- Deeds of consent are just one part of protecting your business – make sure you have the right suite of legal documents in place as your company evolves.
If you’d like a consultation on deeds of consent or any legal documents for your Australian company, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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