Shareholders' agreement: existing company

A comprehensive shareholders agreement for an existing company. Use this agreement to protect the rights of each shareholder against each other and also for setting down the strategic management of the company. This agreement could be put in place perhaps on the introduction of new shareholders or directors, a new financing round, or after restructuring, or simply to redress the balance of shareholder power as the company grows. It is suitable for companies where all or some shareholders are also directors, or where there is a mix of active and inactive owners.

Suitable for use in: ACT, NSW, NT, QLD, SA, TAS, VIC and WA
Price A$89.00
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About this shareholders' agreement

A shareholders agreement is an essential document to confirm the rights of the shareholders, one against another and against other stakeholders in the business, and to set out how the shareholders intend to operate the company. It takes over where corporation law stops.

This document has been written for the owners of a company that is already trading and that require a new agreement perhaps because of the introduction of a new shareholder or the departure of a former one, or perhaps because the business has grown in a different way to how it was envisaged when a previous agreement was in place.

It is suitable for companies of all sizes and in all industries, and where all or some shareholders are also directors.

This shareholders’ agreement protects the interests of the minority shareholders and provides a detailed framework of freedom for working shareholder-directors.

The document additionally includes provision for valuation of the shares of a departing shareholder by reference to a valuation based on your instructions to an accountant. The valuation depends on the parameters used, so your instructions are critical. We have provided a comprehensive version which you can edit according to the deal you wish to strike with a selling shareholder.

The law in this shareholders' agreement

The law in this shareholders’ agreement is based on both corporation law and contract law. Within the structure of corporation law, you can choose the terms that best suit your situation, so you do not need to study any particular law to be able to edit your shareholders’ agreement. The agreement is up-to-date and very comprehensive.

When to use this shareholders' agreement

This agreement is suitable for any private company, no matter what its business. It is about rights, power, control and safeguards, not about your business.

A company’s shareholders agreement can be redrawn at any time, but is commonly done when the relationship between the shareholders and the directors changes, perhaps as a result of one or more of the following:

  • company formation
  • a change in management structure
  • when directors become incentivised with share capital (or options)
  • sale or transfer of shares to a new shareholder
  • increasing the share capital of the company
  • entry of a new shareholder or stakeholder (such as a business angel or venture capitalist)
  • on the injection of debt into the business
  • death or liquidation of a current shareholder

However, the best time to put an agreement in place is “now”. Clarity on how decisions are made will let you sleep better at night, whether you hold a small proportion or a large majority of the shares.

All the shareholders must sign the shareholders agreement but there are no rules about which of them must manage the process of taking the agreement through to signatures.  Any shareholder could suggest that the document is necessary and could start the discussions.

Shareholders' agreement features and contents

No other shareholders’ agreements for sale on the Internet are in plain English or are so comprehensive in their cover of legal issues and the drafting explanations and tips supplied. Net Lawman’s slogan “Real law, in plain English” is as true of this document as of any others.

In many areas, we give you complete alternative paragraphs and explain in the notes when each will be the most suitable for you.

This document contains over twenty commercial paragraphs as well as what you might call technical legal provisions. You can choose which are suitable for your needs. Many are based on our practical experience as solicitors of dealing with shareholder disputes.

Examples of these provisions are:

  • obligations of the company to the shareholders (the company is also a party to the agreement);
  • how shareholders will maintain their rights if they are not present at meetings;
  • roles of directors and actions by the company or a director which require shareholders’ consent: controls and redistributes power between shareholders so that majority shareholders cannot force decisions;
  • new shareholder rights and restrictions: even if he is a trustee in bankruptcy;
  • special protection of a minority by specification of critical decisions that must be agreed by that shareholder
  • facility for a minority shareholder to appoint his or her own nominated director who cannot be removed by the others
  • how to deal with new intellectual property;
  • transfers of shares and rights of pre-emption: when allowed, under what conditions and to whom;
  • exit strategy: the hidden bomb if neglected;
  • key man insurance;
  • publicity about the deal;
  • confidentiality;
  • use of a shareholders own assets in the business;

Other versions of this shareholders agreement

We also offer a version of this agreement for a newly incorporated company.

If the company does not have an outside investor, you may prefer to use this simpler alternative agreement that does not contain provisions specified above for such shareholders.

 
Draftsman

This document was written by a solicitor for Net Lawman. It complies with current Australian law.

AU-CPsha02 - Shareholders' agreement: existing company (Suitable for use in: ACT, NSW, NT, QLD, SA, TAS, VIC and WA)

 
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