What to Include in Your Shareholders Agreement

Shareholder agreement lawyer

There is no single form of shareholders agreement that is correct. What you include will ultimately vary according to the type of company, what your shareholders agree upon and any other relevant factors. 

At Melbourne Law Studio, a business contract lawyer from our team can help Victorian companies draft tailored shareholders agreements suited to their specific circumstances. Below we look at a handful of common clauses you may include.

Roles and Obligations

Include a description of each shareholder’s role, rights, obligations and responsibilities. This ensures everyone understands what is required of them and helps prevent future shareholder disputes. The agreement should cover rights to access information and financial reports as well as who and when different shareholders can appoint directors. For example, only those with shareholdings over a certain percentage. 

Company Management and Decision-Making

The agreement should specify each shareholder’s role in managing the company and contributing to decisions. For example, whether some decisions require a majority (50%) vote while other decisions require a unanimous (100%) agreement. 

Different shareholders often want different provisions based on their company ownership. Minority shareholders may want provisions that prevent them being marginalised during decisions, while majority shareholders may want provisions preventing minority shareholders vetoing or otherwise stifling decision-making processes.

Deadlock and Dispute Resolution

Include provisions that deal with situations where shareholders can’t agree on major decisions or the management of the company. Common examples include:

  • A chairman clause, where one shareholder becomes chairman with the casting vote
  • A shotgun clause, where shareholders can buy out other shareholders at a nominated price to break the deadlock
  • A liquidation clause, allowing for the company to be wound up if the deadlock is unresolved for a certain period of time

A shareholders agreement should also outline a step-by-step alternative resolution process on fairly managing shareholder disputes. A shareholder agreement lawyer can help you determine appropriate processes for managing disputes and deadlocks.

Transfer of Shares

It is also important to include provisions around the transfer of shares to other parties. For example, a drag along option allows majority shareholders to force a minority shareholder to join in the sale of shares. A tag along option is where if a majority shareholder is selling their share, a minority shareholder can join the transaction to sell their stake.

Speak with a Shareholder Agreement Lawyer in Melbourne

Keep in mind that this is not an exhaustive list of clauses to include in a shareholders agreement. Other important areas include clauses around dividends and financing, exit strategies, shareholder funding and contributions, confidentiality, intellectual property rights and more.

For help creating a shareholders agreement for your Victorian company, book a free 15-minute consultation with a business contract lawyer at Melbourne Law Studio by calling 03 9021 1421 or contacting us online.

Recent Posts