Shareholder agreements provide a framework for addressing issues
which can arise in a business, such as agreeing on the way in which
a business is to be managed and resolving potential disputes
between the shareholders. They are a crucial part of business
planning and will almost certainly be called upon at key
What is a Shareholders Agreement?
A shareholders agreement is a written document which provides
clear documentation of the principles agreed upon by the owners of
a business across a range of key issues.
What are the Benefits of Having a Shareholders Agreement in
There are various benefits to having a shareholders agreement
Clear documenting of the exit strategy for shareholders;
A framework for addressing business–critical issues when
A clear outline to aid shareholders when disputes arise;
Settling of control measures to assist the business to avoid
unplanned expenditure or debt.
How is a Shareholders Agreement different to a Buy–Sell
A Buy–Sell Agreement addresses insurable risks such as
debt, disability and trauma to an owner. A Shareholders Agreement,
by contrast, seeks to minimise non-insurable risks by putting in
place an agreed framework.
What if my trading structure is not a company?
The term "Shareholders Agreement" is used mainly in
regards to company structures; similar instruments exist for other
structures, such as a unit holder's agreement in the case of a
unit trust and a partnership agreement in the case of a
The main elements of a shareholders agreement are as
A description of each person's involvement in the
Management principles, including dispute resolution
Rules regarding the equity of the company, such as allotments
and transfer of shares;
Rules relating to the debt of the company, including who must
contribute funds and how they are to be repaid;
Pre-emption clauses which cover what should happen if a
Shareholder wishes to sell their shares, this will cover a range of
issues such as who can purchase the share, how the share is to be
valued in the Notice Period that needs to be given;
Decision making rules (i.e. which decision can be made
unilaterally versus by majority versus unanimously);
Force disposal clauses setting out the circumstances in which a
Shareholder can be compelled to sell their shares.
Clauses dealing with deadlocks;
Restraint of Trade imposing limitation on Shareholders (current
and former) from competing with the business or soliciting clients
Agreed rules as to when the Agreement can be legitimately
terminated by the parties involved.
What is the Role of Kaden Boriss Legal?
We coordinate and facilitate the entire process, drawing on our
extensive experience drafting shareholder agreements. Please
contact Andrew Bautovich for further advice on (03) 8963 8038.
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.
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