Putting in place a Shareholders' Agreement when you start a
business can significantly reduce the risk of costly disputes
between business partners, as the recent case between the owners of
Grill'd, a popular Australian burger chain, demonstrates.
The owners of this business recently ended up in the Federal
Court of Australia in a dispute over their shareholding in the
The first Grill'd store was established in 2004 by Simon
Crowe together with friends Simon McNamara (a former chief
executive of Boost Juice) and Geoff Bainbridge (an ex-Fosters
executive). Media reports put the value of the Grill'd empire
at $300 million having expanded to more than 100 stores across
Australia in 12 years. McNamara and Crowe were reportedly childhood
friends whilst Crowe and Bainbridge had met at Fosters in 1999 and
were close friends McNamara even acted as MC at Crowe's
Crowe and Bainbridge bought McNamara out of the business in 2011
following McNamara's involvement in Spud Bar, another fast food
Where it all went wrong
The relationship between Crowe and Bainbridge apparently
progressively soured over the years, most recently over
Bainbridge's investment in Pizza Religion, a company Crowe
viewed as a competitor to Grill'd.
Bainbridge, who holds 25 percent of the company, sought an
oppression order from the Court claiming he was denied access to
the company's books and records. He also sought to have the
company's CFO and director removed from the company. He alleged
that Crowe breached his duties as a director and used company staff
and resources to fund his purchase of the chocolate company, KoKo
Crowe's counter-claim sought an order from the court forcing
Bainbridge to sell his minority share in the company on the basis
that their working relationship had deteriorated to the extent that
it was impossible for the pair to work together.
The Grill'd dispute highlights the importance of having a
Shareholders' Agreement in place even where a business venture
involves two commercially sophisticated individuals. A
Shareholders' Agreement will often contain a non-compete clause
which may have prevented the owners from investing in rival
businesses, will usually contain a description of the business of
the company and the purposes to which company funds and resources
may be put and will usually provide a mechanism for dispute
resolution which would mean that the shareholders could have
avoided resorting to court proceedings to resolve their issues.
As the Grill'd example demonstrates, even longstanding
friends can fall out over business ventures. If you are
contemplating investing in a new or existing business venture with
other shareholders and wish to obtain advice on whether your
business arrangement requires a Shareholders' Agreement, talk
to your legal adviser.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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