Get expert help with your company’s Shareholder Agreement

A Shareholders Agreement is a legally binding contract between all shareholders of a company, outlining the key terms of their arrangement. Since shareholders own shares in a company, they hold a stake (or equity) in the business, and this agreement sets the ground rules for how that ownership is managed.

Even if you’re in business with friends or family, having a Shareholders Agreement is crucial. It helps establish clear ground rules that protect everyone’s interests, maintain good relationships, and support the smooth operation and growth of the business. As your business expands and the stakes become higher, a well-drafted Shareholders Agreement ensures that everyone is aligned and prepared for various scenarios.

For more details or assistance with drafting a Shareholders Agreement, read more here.

Yes, if you’re setting up a company with more than one shareholder, having a Shareholders Agreement is essential. Here’s why:

1. Clarity for Future Investors:
   • A Shareholders Agreement provides clear guidelines on how the business is structured, the rights and responsibilities of shareholders, and how decisions are made. This transparency is crucial when seeking new investments, as it gives potential investors confidence in the company’s governance and reduces perceived risks.
2. Prevention of Conflicts:
   • Disagreements between shareholders can arise over decisions, finances, or the direction of the business. A Shareholders Agreement helps minimise conflict by setting out clear rules for how disputes should be handled, ensuring that there is a fair and structured process for resolving any issues that may occur.
3. Efficient Business Operation:
   • With predefined rules in place, a Shareholders Agreement allows the company to operate smoothly and efficiently. It ensures that everyone is aligned on how major decisions (like issuing new shares or selling the business) will be made, reducing delays and misunderstandings.
4. Protection of Shareholder Interests:
   • The agreement can include provisions that protect the rights of minority shareholders, ensure fair valuation of shares, and outline procedures for buying or selling shares. This provides peace of mind for all shareholders, knowing their interests are safeguarded.
5. Clarity on Roles and Responsibilities:
   • Clearly defining the roles, responsibilities, and voting rights of each shareholder ensures everyone understands their duties and expectations. This clarity supports smooth collaboration and accountability within the company.

In summary, a Shareholders Agreement is crucial for companies with multiple shareholders because it establishes clear rules, reduces the potential for conflict, and makes the business more attractive to future investors. It is an important legal document that helps your company run smoothly and sets a solid foundation for growth. If you need assistance in drafting a Shareholders Agreement, Sprintlaw’s experts can help ensure it is tailored to your specific needs.

A Shareholders Agreement is a comprehensive legal document that outlines the terms governing the relationship between shareholders and the overall operation of the company. It typically covers several key areas, including:

1. Business Objectives and Purpose:
   • The agreement defines the nature and objectives of the business, ensuring all shareholders are aligned on the company’s vision and goals. This clarity helps guide decision-making and future strategies.
2. Decision-Making Processes:
   • It specifies how decisions will be made within the company, including what matters require shareholder approval versus decisions that can be made by the board of directors. This could include day-to-day operations, as well as significant decisions like approving budgets, entering contracts, or acquiring assets.
3. Issuing and Transferring Shares:
   • The agreement outlines the rules for when and how shares can be issued, sold, or transferred. It may include restrictions on selling shares to external parties, pre-emptive rights for existing shareholders, and conditions for new share issuance to ensure control over company ownership.
4. Dispute Resolution Mechanisms:
   • It is essential to have a clear process for resolving disputes between shareholders. The agreement may set out methods such as mediation or arbitration, to handle conflicts efficiently and avoid prolonged legal battles.
5. Rights and Responsibilities of Shareholders:
   • The agreement details the rights, duties, and responsibilities of each shareholder, ensuring everyone knows their role in the company and what is expected of them. This promotes accountability and cooperation among shareholders.
6. Dividend Distribution:
   • It specifies how profits (dividends) will be distributed among shareholders, including when dividends can be declared and how they are calculated. This ensures transparency in financial matters and avoids disputes over profit-sharing.
7. Exit Strategy and Buyout Provisions:
   • The agreement outlines what happens if a shareholder wants to exit the company, including buyout provisions, share valuation, and procedures for selling shares. This helps prevent disputes over share transfers and protects the company’s continuity.
8. Protection of Minority Shareholders:
   • To ensure fairness, the agreement can include provisions that protect the interests of minority shareholders, such as veto rights on critical decisions or protections against unfair dilution of shares.
9. Confidentiality and Non-Compete Clauses:
   • Shareholders may be required to keep sensitive business information confidential, and the agreement can include non-compete clauses to prevent shareholders from starting or joining competing businesses.

A Shareholders Agreement is often more complex than it appears, as it covers a wide range of legal, financial, and operational aspects of the business.

Using a lawyer to draft your Shareholders Agreement is crucial because it ensures the agreement is tailored to the specific needs and circumstances of your business. Here’s why this is important:

1. Customised to Your Business:
   • Every business is unique, and a template agreement may not cover all the specific aspects that are important to your company. A lawyer can tailor the Shareholders Agreement to address your particular business structure, industry, and shareholder dynamics, ensuring that all relevant issues are properly addressed.
2. Expert Legal Advice:
   • Setting up a Shareholders Agreement involves complex legal and financial considerations. A lawyer can provide expert advice on issues that may affect your business, such as share transfers, voting rights, dividend distribution, and exit strategies. They can help identify potential risks and suggest solutions to protect your business interests.
3. Clarity and Precision:
   • Ambiguities in a Shareholders Agreement can lead to disputes and legal challenges down the line. A lawyer will draft the agreement with clear, precise language, ensuring there is no confusion about the rights, obligations, and responsibilities of each shareholder. This helps prevent misunderstandings and conflicts.
4. Comprehensive Coverage of Key Issues:
   • A Shareholders Agreement needs to cover a wide range of important topics, including decision-making processes, dispute resolution, share transfer rules, and protection of minority shareholders. Lawyers have the expertise to ensure all critical aspects are included, leaving no gaps that could cause problems in the future.
5. Adaptability for Future Growth:
   • A business can change significantly over time. A lawyer can draft the agreement in a way that provides flexibility for future growth, such as adding new shareholders, raising capital, or expanding operations. This adaptability can help your business scale smoothly without needing to renegotiate key terms.
6. Prevention of Costly Legal Disputes:
   • One of the main reasons to have a properly drafted Shareholders Agreement is to prevent legal disputesbetween shareholders. A lawyer can help ensure that the agreement includes clear processes for resolving conflicts, handling exits, and making major decisions, reducing the likelihood of costly disputes.

In summary, having a lawyer draft your Shareholders Agreement ensures that it is comprehensive, clear, and customised to your business’s unique needs. This not only protects your company’s interests but also fosters smoother operations and growth. Sprintlaw’s expert lawyers can guide you through the process and help you draft or review a Shareholders Agreement that meets all your requirements.

Yes, a Shareholders Agreement can be amended if all shareholders agree to the changes. It’s common for businesses to update the agreement over time as the company grows, new shareholders join, or business needs change. However, making changes to the agreement requires a clear, formal process to ensure that any amendments are legally valid and enforceable.

Here are a few key points to consider when amending a Shareholders Agreement:

1. Unanimous Agreement:
   • Typically, all existing shareholders must unanimously agree to any changes. This ensures that everyone’s rights and interests are considered before amending any part of the agreement. The requirement for unanimous consent should be clearly outlined in the original agreement.
2. Clear Amendment Procedure:
   • The Shareholders Agreement should include a procedure for making amendments, such as how proposed changes are communicated, how meetings to discuss amendments are conducted, and the process for formally documenting any agreed changes. Following these steps helps avoid misunderstandings and ensures transparency.
3. Legal Review:
   • Any amendments should be reviewed by a lawyer to ensure they are legally sound and do not create conflicts with existing terms or other legal obligations. This is especially important if the changes involve complex matters, such as share transfers, voting rights, or financial arrangements.
4. Signing an Updated Agreement:
   • Once the amendments are agreed upon, a new version of the agreement should be drafted, reflecting the changes. All shareholders must sign the updated document to make it legally binding.
5. Notifying Relevant Authorities (If Needed):
   • In some cases, significant changes may need to be communicated to external parties, such as regulatory bodies, investors, or financial institutions, to ensure compliance with legal or contractual obligations.

Amending a Shareholders Agreement allows the company to adapt to changes and ensures that all shareholders remain aligned as the business evolves. However, it’s essential to follow a formal and legally compliant process to avoid potential disputes or invalid changes. Sprintlaw’s expert lawyers can help review or draft amendments to ensure everything is handled smoothly and correctly.

This package includes everything you need to set up your company’s Shareholder Agreement, starting from $1200 + GST. We will draft a Shareholders Agreement in accordance with the requirements of your business, provide an ASIC company search for 1 company (if required) , phone consultations with a Sprintlaw lawyer and a complimentary amendment to the final draft we provide you.

Disclaimer: please note that addition fees apply if you request several rounds of changes (including as a result of negotiations between parties/shareholders).