If you are investing in a business or considering the formation of a new business there is a lot to consider. Aside from deciding what business structure your business or investment in a business is to have, one of the most important things to consider is a shareholder’s agreement. A shareholder’s agreement is a contract between the shareholders of a company which sets out their rights and obligations in relation to each other and the company. It would be helpful to consult an expert in corporate law to have better understanding about shareholder’s agreement and forming a business.

It gives the investors certainty on a number of issues like the appointment of directors and their terms of engagement, share buy back and/or ‘drag along’ or ‘tag along’ provisions. Other issues which might be addressed include insurance for directors, the terms on which new subscriptions of shares can be made, the quorum for board meetings, the payment of dividends, the sale of shares, how loan accounts with the company are to operate, confidentiality issues and the jurisdiction of law in which the company is to operate.

You will also often need to look at the company constitution in order to verify that there is not a conflict with the constitution of the company. Many companies have simply adopted the replaceable rules of the Corporations Act 2001 (Cth) but others haven’t and in the case where the constitution is non-standard it is necessary to review both the shareholder’s agreement(s) and the company constitution to adequately understand what the rights and obligations of shareholders are in relation to the company and the other shareholders.

We have fixed fee shareholder agreements available which we can draft for you when you are in the process of setting up a business or if you need to amend a shareholder agreement can assist with the process of drafting a deed of amendment to a shareholder agreement. Please do not hesitate to contact us if you would like more information about shareholder agreements.