Shareholders' Agreement is necessary for any private limited liability company, particularly when it is not a family owned company, as not all aspects governing the relationship between shareholders are explicit in the Corporations Act 2001 or implied by law.
These days a shareholders' agreement is not uncommon. A Shareholders' Agreement is important, particularly in some of the following situations:
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varying classes of shares being issued in a company with different rights attached to them, for example, whether certain classes have voting rights and how a dividend is distributed to certain classes
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what constitutes a quorum at shareholders meeting for different classes of shares when certain decisions can be voted upon by a particular class of shareholders
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voting rights in respect of certain types of decisions so that there is no oppression of the minority or where the minority cannot hold the majority to ransom, for example, if the company wishes to list on the stock exchange
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resolving a deadlock where the voting is split 50%-50%, particularly when you have only two shareholders holding equal shares
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dividend policy particularly when there is spare profit available for distribution but the majority decides against it
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enunciating the policy for issuing any new shares, bonus shares or options for example to non-existing shareholders, particularly to attract senior management to the company
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which class of shareholders and how many shareholders will also be officeholders of the company and resignation of officeholders if they are no longer shareholders
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where shareholders are also officeholders and involved with day-to-day management of the company at the exclusion of other shareholders, who would chair the meeting and what would be the quorum and what decisions have to be made by shareholders and not the officeholders
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whether any shareholder will be employed by the company and the terms of employment by the company and resignation from employment if they sell their shares in the company
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sale of shares when a shareholder exits or has to exit the company, for example upon termination of employment by the company, death, bankruptcy or for reasons of mental incapacity or when the shareholder just wants to sell out
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whether the shares should be bought by the company or first offered to other shareholders before being sold to any outsiders
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whether the parcel of shares being sold should be purchased as a whole or can it be split up, particularly where the company is not purchasing and other shareholders do not want to take the whole parcel
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formula for share valuation or how will the share be valued at any particular time as these shares are not listed on the stock exchange and the company should not be made to bear the cost of valuation every time a shareholder departs
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whether the company would like to have a keyman policy so that it is able to purchase the shares upon death of the shareholder
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necessary restrictive covenants in respect of departing shareholder so that the shareholder is not able to compete with the company upon departure
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loans by the company to shareholders or whether shareholders will be required to lend money to the company and at what interest rate and on what terms
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external debt raised by the company, what securities are to be provided and to what extent will the shareholders be required to provide personal security
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setting out company policy in respect of terms of trade between a shareholder and the company when a shareholder is contracted to provide goods and services to the company
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the disputes resolution mechanism if there is a dispute between the shareholders as to the rights of the shareholders or dispute in respect of the company and how the company is being operated
It is therefore imperative that such an agreement is in place on commencing busines and should you believe that you require legal advice please call LAC Lawyers Pty. Ltd. to assist you.
Contact us now for Fast, Accurate and Timely legal advice
Phone LAC Lawyers on NSW 1300 799 888 or VIC 1300 734 638 or send us an email