Shareholders Agreements – Protecting Your Investment
A shareholders agreement is a vital document that governs the relationship between shareholders and the company. It protects the investment of each shareholder, sets out how the company will be managed, and provides a framework for resolving disputes before they escalate.
While the Corporations Act 2001 provides a general legal framework, it does not address the specific needs of every business. A tailored shareholders agreement allows you to establish clear, fair, and binding arrangements that reflect the goals of the company and the interests of its shareholders.
Why You Need a Shareholders Agreement
Without a properly drafted agreement, disputes between shareholders can quickly become disruptive and costly. A shareholders agreement can help to:
- Define the rights and responsibilities of shareholders
- Regulate the issue, transfer, or sale of shares
- Clarify how the company will be run on a day-to-day basis
- Protect minority shareholders from unfair treatment
- Ensure major decisions (such as mergers, capital raising, or sale of the business) are made transparently and fairly
- Provide mechanisms for resolving disputes efficiently
In short, a shareholders agreement reduces uncertainty and provides security for both the shareholders and the company itself.
What Should Be Included?
The exact clauses in a shareholders agreement will depend on factors such as the type of business, the number of shareholders, and the long-term goals of the company. However, some common provisions include:
- Dividend policy – how and when profits will be distributed
- Issuing and transferring shares – rules around bringing in new shareholders or selling existing shares
- Competition restrictions – preventing shareholders from engaging in activities that compete with the company
- Management and control – outlining who makes key decisions and how directors are appointed
- Funding and capital contributions – detailing how additional capital will be raised
- Exit strategies – buy-sell arrangements, pre-emptive rights, or “drag-along/tag-along” provisions
- Dispute resolution – agreed processes to resolve disagreements quickly without damaging the company
Every business is different, which is why no two shareholders agreements should ever look the same.
How Parke Lawyers Can Help
At Parke Lawyers, our Accredited Specialist Commercial Lawyers in Melbourne regularly draft, review, and negotiate shareholders agreements for companies of all sizes. We:
- Tailor agreements to meet the unique needs of your business
- Provide practical advice in plain English so all shareholders clearly understand their rights and obligations
- Ensure the agreement reflects both your commercial goals and your long-term risk management strategy
- Help resolve shareholder disputes efficiently where they arise
Take the Next Step
A well-drafted shareholders agreement is one of the most important investments you can make in the stability and success of your company.
Your Business Law Team
