5 Reasons Your Company Needs a Shareholders Agreement

Shake hands of businessmen shaking hands to congratulate each other or confirm agreement

While not required by law, a shareholders agreement is essential for businesses if they have or intend to have more than one shareholder. A well-drafted shareholders agreement can provide clarity by ensuring all shareholders are on the same page and are aware of their rights and obligations. Below, Melbourne Law Studio outlines five key reasons your company should have a shareholders agreement in place. Contact us to hire a business contract lawyer.

1. Mitigate Disputes

An effective shareholders agreement drafted with the help of a business contract lawyer can mitigate disputes by anticipating any issues that may become a concern in the future. Issues brought to the surface before becoming material can be appropriately addressed in the shareholders agreement, avoiding costly future disputes.

2. Dispute Resolution

Disputes commonly arise between shareholders no matter how well-drafted or deeply considered your shareholders agreement is. It’s highly beneficial to have a process of dispute resolution set within the shareholders agreement. This facilitates a timely and fair resolution of disputes as shareholders have already agreed to a method of resolving issues and understand the process involved.

3. Considers Business Structure

A well-drafted shareholders agreement outlines the structure, management and direction of a business. This allows for a clear strategy incorporating both legal and accounting considerations that helps uncover and mitigate risks.

 4. Demonstrates Business Maturity

An effective shareholders agreement illustrates that the business is well structured, mature and credible. This provides confidence and clarity for future investors, who can understand the mechanisms, rules, rights and responsibilities that apply to shareholders. This ultimately entices new investment.

5. Protect Shareholder Interests

A shareholders agreement can provide protection for some or all shareholders. For example, protecting minority shareholders by limiting the ability to issue further shares without unanimous consent or protecting majority shareholders with “drag along” provisions.

Business Lawyer Melbourne

When you need a business lawyer Melbourne and Victoria based businesses can count on the team at Melbourne Law Studio. We can help draft, interpret, advise on and negotiate shareholders agreements. Call us today on 03 9021 1421 or contact us online.

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