What is a Shareholders’ Agreement?

What is a Shareholders’ Agreement

A Shareholders’ Agreement (similar to a Partnership Agreement) is an Agreement between two (2) or more co-owners of a business setting out their agreements with respect to the management and control of the business and roles and responsibilities of each of the co-owners. Shareholders’ Agreements also dictate the rights and obligations of co-owners in the event of a dispute or proposed sale of their interest in the business.

Among other things, Shareholders’ Agreements regulate the following:

  • the Purpose of the Company;
  • the Roles and Responsibilities of Shareholders;
  • the Appointment and Removal of Directors;
  • Remuneration and Indemnity of Directors;
  • Board Meetings, Voting and Decision Making on behalf of the Company;
  • Management of the Company;
  • the preparation and review of Budgets, Business Plans and Financial Information;
  • Access to Company Information;
  • Funding of the Company, Loans and Guarantees;
  • the Issue and Disposal of Shares;
  • Drag and Tag Along rights of Shareholders;
  • Rights to Acquire Shares of retiring or terminated Shareholders and methods for valuing Shares;
  • Dispute Resolution procedures;
  • Restrictions on Competition by existing and former Shareholders; and
  • Confidentiality of Information.

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By Sam Roberts,
Managing Director, Accredited Specialist (Commercial Litigation)