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One of the most common elements of a company is having shareholders. Shareholders are essentially people who “own” the company through holding shares.
Their role and obligations to the company are usually set out in a Shareholders Agreement, which shareholders need to sign to show they will fulfil these obligations.
However, a company may choose to bring on additional shareholders. Instead of drafting an entirely new agreement, a common option is to have a Deed of Accession. This acts as a ‘joining document’ so that the new shareholder can simply agree to the existing terms.
In this article, we’ll go through what a Deed of Accession is all about and why they can be of value to a company.
When Do I Need A Deed Of Accession?
Usually, companies will have a Deed of Accession when they want to bring on a new shareholder.
Rather than drafting a new agreement, the new shareholder can simply show their consent to abide by the terms which apply to existing shareholders.
What Is A Shareholders Agreement?
When a shareholder first joins a company, the company will usually have them sign an agreement that sets out their involvement and role. This is known as a Shareholders Agreement.
A Shareholders Agreement will usually set out:
- How shares are managed
- Rules around voting rights
- How a shareholder can leave the company
- Rules around who can be a shareholder
- Selling or purchasing shares
- Liabilities
A Shareholders Agreement should be drafted according to the specific needs of a company. If you need one for your business, chat to our expert lawyers today.
What If A Shareholder Wants To Leave?
If a shareholder wants to leave the company, it’s not as simple as resigning. They’ll need to follow the process and rules set out in the relevant Agreement (usually the Shareholders Agreement, or the Company Constitution).
Firstly, a shareholder who wants to leave will need to sell their shares. Depending on what the Agreement requires, this may involve offering the shares to existing shareholders, or selling to a third party.
The Shareholders Agreement should also set out whose approval or consent is required when it comes to the selling process.
Alternatively, the company can buy the shares back from the shareholder – this arrangement would be governed by a Share Buyback Agreement. It’s important to go about this process correctly as share buybacks are regulated closely by ASIC.
These processes have rules that need to be complied with, so it’s worth chatting to a lawyer who can guide you through your options;.
Do I Need To Notify ASIC?
Since a shareholder’s exit is a change to the company, you’ll also need to notify ASIC through the correct form – if you’re not sure, our lawyers can help you through this process to ensure you don’t miss any important steps or details.
Corporations Act 2001
Companies in Australia are held to relatively high standards. For example, their activities and internal processes are regulated by the Corporations Act 2001.
This Act sets out rules around how companies hold meetings, vote, manage shares and how their governing documents should be drafted.
The Act also sets out some details around Shareholders Agreements, so it’s worth familiarising yourself with its provisions.
Where Can I Get A Deed Of Accession For My Business?
A Deed of Accession needs to be carefully drafted, as it needs to comply with the rules set out in your Shareholders Agreement and Company Constitution.
At Sprintlaw, we offer a Deed of Accession package which includes:
- A high level review of your Shareholders Agreement and Company Constitution
- Drafting a Deed of Accession
- Phone consultations with a Sprintlaw lawyer who can advise you on the legal issues that apply to your business
Key Takeaways
Having shareholders as part of your company is great for your business’ growth. However, it also comes with responsibilities on your end.
It’s important to have terms that your shareholders are bound to. To make things more efficient, it’s recommended to have a Deed of Accession so that you can onboard new shareholders without the need to draft entirely new agreements.
If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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