A shareholders’ agreement is an agreement that governs the relationship between a company, its shareholders and other key people. A shareholders’ agreement shouldn’t be an ‘off the shelf’ product, rather the agreement should ideally be negotiated between the shareholders and the company to ensure that it properly deals with the specific issues of that company.
Do you have to have a shareholders’ agreement?
There is no legal requirement to have a shareholders’ agreement. We consider a shareholders’ agreement to be critical in a number of circumstances. A shareholders’ agreement should be considered if:
- a company owns and operates a business;
- there is more than one shareholder; and
- the shareholders want certainty about how the company and its members’ rights and obligations.
In our experience, disputes between shareholders and other people often arise when there is a misunderstanding (or a misremembering) between shareholders about their rights and obligations. A shareholders’ agreement allows the parties to clarify their relationship and their agreement, and ideally should be one of the first things a new venture considers. They also offer the opportunity to put a measure of appropriate corporate governance in place, which can assist the company and its directors as the business grows.
What does a shareholders’ agreement deal with?
There are a wide variety of matters that a shareholders’ agreement can cover, but at a minimum, they should deal with the following areas:
- the operations and management of the company – who and how decisions are made;
- contributions to the company – how the company’s capital was raised, and how can further capital be raised;
- dealing with shares – how shareholders may deal with their interests in the company, and how the company may issue new shares;
- business planning and strategy – implementing a policy for annual business planning and formal procedures for meetings;
- dispute resolution and deadlocks – how disputes can be dealt with in a sensible and cost effective manner.
How do you prepare a shareholders’ agreement?
Shareholders agreements should be prepared with the input of the shareholders, the key people associated with the shareholders and assistance from professional advisors. Ballantyne Law Group is able to guide both startups and established companies through this process.
We have also prepared a helpful overview and checklist to assist companies and shareholders prepare shareholders’ agreements – if you would like to download this checklist, please click here.
If you would like to discuss shareholders’ agreements or any other matter with our team, please contact us or call (07) 5606 7332 to speak to our team.
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