Shareholders Agreement

What is a Shareholders Agreement?

A Shareholders Agreement is a contract between some or all of the shareholders in a company. In many cases, the company is also a party to the Agreement.

A Shareholders Agreement is a valuable document which can help to set out the various rights and obligations of the shareholders, and can clarify many details about how the company will operate.

What is the difference between a Shareholders Agreement and a Company Constitution?

A Company Constitution is a mandatory company document which sets out the fundamental governance rules for the company. It covers various matters such as the structure of the company, powers and duties of the directors and shareholders, and the appointment or removal of directors. It applies to the company as a whole, and to all shareholders.

A Shareholders Agreement is a private contract between whichever shareholders sign it. It primarily governs the relationship between the shareholders such as the transfer of shares, funding requirements, how dividends will be handled, and special rights or obligations of particular shareholders.

Is is mandatory to have a Shareholders Agreement?

No, a Shareholders Agreement is not mandatory. It is an optional private contract between shareholders. However, it is a very valuable document which can help to set out the various rights and obligations of the shareholders, and can clarify many details about how the company will operate.

Who is involved in a Shareholders Agreement?

The first parties to a Shareholders Agreement are the shareholders of the company. The document does not need to be signed by all of the shareholders.

In many cases, the company itself is also a party to the Shareholders Agreement.

What has to be done once a Shareholders Agreement is ready?

In order to ensure that this Shareholders Agreement is compatible with the Company Constitution, it is a good idea to review the Company Constitution before finalising this Agreement. There is often some crossover between the two documents. If not checked carefully, there may be conflicts or contradictions between the two documents.

Once the Agreement has been prepared, each party may be given a copy of the Shareholders Agreement so that they can read it. If each party is happy with the Agreement they can sign it and have their signatures witnessed by an independent adult person.

Each party may keep a copy of the Agreement for their own records.

Is it necessary to have witnesses for a Shareholders Agreement?

It is not mandatory to have signatures witnessed on a Shareholders Agreement. However, witnesses can be useful for evidentiary purposes, if there is ever a dispute about the validity of the signatures at a later date.

What must a Shareholders Agreement contain?

Given the variety of forms that companies can take, Shareholders Agreements also can vary significantly. Some of the details which may be provided in this document include:

• the number of shares held by each shareholder
• details of different share classes
• provisions relating to share issues and share transfers
• provisions relating to future capital injection
• provisions dealing with shareholders exiting the company
• details of any of first refusal for shareholders in buying shares from other shareholders
• "drag along rights" and "tag along rights"
• provisions relating to voting blocks / pacts
• details of any dividend policy
• provisions relating to appointment of directors, removal of directors, obligations of directors and director salaries
• details of shareholder lock-in periods

Which laws apply to a Shareholders Agreement?

The Corporations Act 2001 (Commonwealth) governs the operation of companies in Australia.

As this Shareholders Agreement is a contract between the various parties to the Agreement, general principles of contract law, as provided by the common law, also apply.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.