What is a shareholders agreement?
A shareholders agreement is a legal contract between the shareholders of a company. The purpose of the agreement is to set out each shareholder’s rights, obligations, and collective commitments to the company. A shareholders agreement governs the management and operation of the company.
Typically, a shareholders’ agreement covers the shareholders’ rights to buy and sell shares, voting rights, and how decisions are to be made. It will also commonly include provisions for dispute resolution, obligations to provide funding, the appointment of directors and any other matters that the shareholders want to agree on.
Do I need a shareholder’s agreement?
A shareholders’ agreement is a very important document it ensures that the rights and responsibilities of the shareholders are explicitly defined and enforceable. Having a shareholders’ agreement in place enables members to understand their roles and responsibilities more importantly a properly drafted shareholders agreement provides mechanisms to deal with shareholder disputes.
How do I write a shareholder’s agreement?
The first step is for the shareholders is to reach agreement on their rights and how the company should operate. Once that is done receiving expert legal advice and support from an experience business lawyer will ensure the shareholder’s agreement is written correctly, is legally sound, and most importantly is tailored to what the shareholders a have agreed.
An experienced commercial lawyer will often have checklists and guidelines which can help shareholders identify key issues. These may include addressing:
- What are the roles and responsibilities of shareholders;
- What are the voting rights of shareholders;
- How are disputes to be resolved;
- What is a default and how is it handled;
- Shareholder obligations to provide ongoing funding;
- When a shareholder wants to leave, transfer and sale provisions; and
- A dividend policy.
Once these issues are agreed then your lawyer will be able to draft, and agreement tailored for your unique business requirements. A shareholder agreement requires the consent of all shareholders. All shareholders must also agree to any changes or alterations that may be required to the shareholders agreement at a later stage.
How much does a shareholders agreement cost?
The cost of a shareholder’s agreement will heavily depend on the complexity of the agreement and the services provided by any legal representation involved. At Lord Commercial Lawyers, a simple, straightforward shareholders agreement will tend to cost around $1,800; however, this can vary depending on the complexity of the agreement.
Shareholder Disputes
In our experience shareholder most disputes occur because one or more shareholders believe they are not receiving a fair share of the profit for the contribution they are making (there can be any other reasons for dispute, but this is the most common). Regardless of the reason if a shareholder’s agreement has been properly prepared it will address how a shareholder can exit or how disputes can be resolved. Having theses mechanisms drafted in the shareholders agreement saves time and money. Without these built in strategies the resolving shareholder disputed becomes a very slow and very expensive procedure.
Can I Use a Shareholders Template?
There are a multitude of shareholder agreement templates online. However, the most important aspect of any agreement is it is customised to what the shareholders have agreed. One size does not fit all. The danger of a standard form shareholders agreement is that it will not reflect what you want.
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Are you looking to have a shareholders agreement prepared or reviewed? Our team of experienced commercial lawyers in Melbourne have extensive experience in providing high-quality commercial contract law advice. We can meet you face-to-face at our centrally located Melbourne office, over the phone, via teleconference or email.
Lord Commercial Lawyers is a contract law firm located at Level 10, 167 Queen Street, Melbourne. Contact us here at (03) 9600 0162 or email info@lordlaw.com.au.
