A problem halved, is a problem shared

A shareholder agreement is not a mandatory document for your privately owned company, but it could very well be the most important document your business invests in.

As a binding contract, a shareholders agreement governs the relationship between the shareholders and addressing the crucial elements of business; management, funding, structure and obligations.

So, does your business need a shareholder agreement?

A privately owned company may not be looking to raise capital immediately, or even ever, but when the shareholding looks to incorporate more than one person, then a shareholder agreement should be implemented.

The concept of a dispute between partners can seem far-fetched at the beginning of a working relationship while the parties are enthused, and assumedly on the same page. Regardless, there are often elements that parties have not considered that can quickly escalate without careful consideration.

A well drafted shareholder agreement will pre-empt any disputes by succinctly addressing all facets of the business and the relationship expectations of each party.

The following should also be considered closely:

- Issuing new shares,

- Shareholder meetings,

- Issuing profits and dividends,

- Exit arrangements such as transferring or selling shares,

- In the event of a stalemate in votes, how will a decision be brokered?

- Confidentiality

- Dispute resolution

A shareholder agreement should be professionally prepared, and tailored to the individual needs of the company. Outlining expectations, sets the foundation for a harmonious working relationship from the outset and going forward.

---

At VRT Lawyers, we are experienced in preparing shareholders agreements and we would like to help you. Should you wish to receive expert advice on any commercial or corporate matters, email law@vrtlawyers.com.au or call 02 9667 1271 to speak to our Commercial Law Team. VRT Lawyers' Commercial Team is headed by Partners John Vizzone and Lisa Ruggero Salerno, and experienced Solicitor Laura Pouri Robertson.