A shareholder agreement is one that is put in place to govern the relationship between the shareholders and the directors of a corporation. It is meant to provide guidelines as to how the parties will interact and conduct business with each other.
A shareholder agreement is necessary not only for setting the parameters within which the shareholders and directors will conduct themselves, but for the financial benefits and health of the company. That’s why it’s crucial you engage an experienced shareholder agreement lawyer early on in the process. Keep reading to learn more about what shareholder agreements involve or speak to our business support team.
What does a shareholders agreement cover?
A shareholder agreement can cover the following:
- Daily structure and management of the business
- Corporate hierarchy
- Purpose and directives of the business
- Responsibilities of the parties including but not limited to the shareholders and directors
- Acquisition and distribution of shares to shareholders and directors
- Rules and regulations for changes within the business structure
- Financial planning for the business and its overall growth
- Methods by which disputes between shareholders and directors will be handled
- How the business will proceed in the event of dissolution and/or breach of the agreement (learn more: breach of contract)
If a shareholder dispute has arisen, please seek the legal advice of a shareholder dispute lawyer. They can help you understand your rights and obligations.
Is a shareholders agreement required?
Generally, a shareholder agreement is not mandatory for a business. However, it is an effective way to ensure the business runs smoothly and efficiently, especially if multiple stakeholders exist.
Is a shareholders agreement legally binding?
A shareholder agreement is a legally binding document. Those who affix their signature to the agreement are legally responsible for abiding by the rules and regulations set forth within it.
How do you structure a shareholder agreement?
The structure for a shareholders agreement will be different for each company, so it’s best to speak to your shareholder agreement lawyer to create one that suits your business.
However, there are some common items that are included in the agreements, such as:
- The funding of the business
- Contribution of capital
- Calculation and receipt of dividends
- Shareholder rights (including voting rights)
- Method for resolution of disputes
- Duties, responsibilities and decision-making power of the shareholders and directors
- Frequency of board/shareholder meetings
- Removal of a director(s)
Speak to shareholder agreement lawyers
In the event that you find yourself in need of assistance, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, our commercial lawyers are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call our shareholder agreement lawyers at your earliest convenience to schedule a consultation on 1800 780 770.
Shareholder agreement FAQs
Can I write my own shareholder agreement?
Yes, a corporation can write its own shareholders agreement. However, because this is a legal contract which will outline and define the operations of the business, it is best to seek the appropriate legal and financial advice from a shareholder agreement lawyer.
When should a shareholders agreement be signed?
Once the document has been drafted and approved by those designated to do so, the agreement should be presented to all of the directors and shareholders who are expected to sign the document.
The agreement should be provided in advance of the expected date for signature. This will allow all parties enough time to review the document themselves, have any of their questions addressed and answered and, if desired, have the document reviewed by their own shareholder agreement lawyer.
The document should have a deadline date for signature by all parties which is reasonable and allows for the above process to be completed. This date also provides a definite time in which the agreement will become legally binding for the operations of the business and enforceable against all signatories.
What happens if you don’t have a shareholders agreement?
The lack of a shareholder agreement does not mean the business cannot move forward in a successful manner. However, in the event that the financial direction of the business or the management of the business comes into question, the lack of a shareholder agreement can make it far more difficult to resolve both financial and structural issues.