Are you an owner (shareholder) of a company or are you considering becoming a shareholder of a company with other shareholders? What is involved and what do you need to consider when becoming a shareholder with others?

A written and signed Shareholders Agreement is paramount in order to set out the rights and responsibilities of the shareholders between themselves and to the company.

Some points to consider

There are many aspects that you need to consider about becoming a shareholder with others in a company. This may include but is not limited to:

  • How shares may be transferred if you or another shareholder want to transfer/sell their shares.
  • Whether any shareholders will have the right to appoint or remove directors of the company.
  • Whether shareholders can be involved in a business that competes with the business of the company.
  • Whether certain matters need to be approved by a certain proportion of shareholders prior to that action occurring regarding the company and business. For example, prior to creating new shares or selling the business.
  • The terms of any monetary loans from and to shareholders and the company.
  • Agreed process for resolution of any disputes or disagreements.
But why is a Shareholders Agreement necessary?

You may think – I want to sell my shares; what next? Let’s look at the Shareholders Agreement to follow the procedure set out for transferring your shares.

You may ask – It would be a perfect time to sell the business; how can we go about that? Let’s look at the Shareholders Agreement to confirm what it says about selling the business.

There are many actions and things that can occur between shareholders and in the running of the business by the company and it is extremely beneficial to have these matters set out in writing and signed by the Shareholders. It may not remove the risk of any disagreements or disputes occurring in the future, but it significantly mitigates against or lessens the risk of disagreements or disputes occurring, as the parties can refer back to what they agreed in the Shareholders Agreement.

We have acted for and advised many clients who have found themselves entangled in a shareholder dispute, and it is a lot easier to navigate and negotiate an agreed outcome if there is a written and signed Shareholders Agreement in place.

We are here to answer any questions you may have and to prepare Shareholders Agreements for you and your company. If you require any assistance, feel free to contact our team on (08) 8186 1735.

The following information is general information only and is not and does not constitute legal advice. If you rely on the information herein, you do so at your own risk. For legal and tailored advice for your specific situation and circumstances, please contact us directly.