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Shareholders agreements and owners agreements

We get the hard questions answered and written down while everybody still agrees.

People go into business together on the strength of getting on, and that works right up until somebody wants out, or the business has a bad year, or one owner starts to feel they are carrying the other. None of those are unusual events. They are the ordinary life of a jointly owned business. The only real question is whether there is a document that says what happens, or whether it gets worked out by two people who have stopped trusting each other, through lawyers, at the worst possible moment. An agreement is written for the version of you that has fallen out.

Speak to a lawyer What is included

The exit settled in advance

How an owner leaves and how their share is valued is agreed at a point when nobody is leaving.

Control over who joins

Transfer restrictions mean you cannot end up in business with somebody you did not choose.

A process, not a fight

Disagreements follow an agreed mechanism instead of becoming an argument about what the mechanism is.

What does a shareholders agreement actually do?

A company already has rules. The constitution, and the replaceable rules in the Corporations Act 2001 (Cth) (the Act) where there is no constitution, cover how directors are appointed, how meetings run and how shares are issued. What they do not cover is the part owners actually argue about: what happens when one of you wants to sell, who has to be offered the shares first and at what price, what happens if an owner dies or becomes ill, whether somebody who leaves can go and start something similar, and who decides the things that are too big for one person. A shareholders agreement is a private contract between the owners that answers exactly those, and it binds only the people who sign it.

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What should a shareholders agreement cover?

The things the constitution does not. Which decisions need unanimous agreement, how profits and dividends are taken, what happens when somebody wants to sell and who gets first refusal, how a departing owner’s share is valued, what happens on death or incapacity, whether an owner who leaves can compete, and how a disagreement gets resolved. The detail depends on your business and your co-owners.

How is this different from the constitution?

The constitution is a public document about how the company is governed. A shareholders agreement is a private contract about how the owners deal with each other. They overlap a little and do mostly different jobs, which is why most companies with co-owners end up with both, drafted so they do not contradict one another.

What if one owner will not sign?

The agreement binds only those who sign it, so an owner outside it is not bound by any of it. That usually means the exercise is worth pausing rather than proceeding with a partial agreement, because the person most likely to cause difficulty later is the one who would not sign. It is also worth understanding why, since the objection is often to a specific term rather than to the idea.

We have been going for years without one. Is it too late?

No, and it is a very common starting point. It is harder than doing it at the outset, because the owners now have positions and history rather than open minds, but it is still far easier than doing it during a dispute. The best time was at the start. The second best is while everybody is still getting on.

Have the conversation while it is still easy

Tell us who the owners are and how the business works between you. We will put the questions that matter on the table, work out where you already agree, and turn that into a document everybody signs.

You are writing this for the version of you that has fallen out

You went into business with people you trust, on terms that were obvious to everybody at the time and were never written down. The trouble is not that the trust was misplaced. It is that trust does not answer questions. When one of you wants to leave, or to bring somebody in, or disagrees about something that matters, there is no agreed process, so the argument is about the process as well as the substance. That is how a manageable commercial conversation turns into a dispute.

We will work through the terms with all the owners and identify what is not yet agreed.
We will draft a shareholders or owners agreement covering decisions, profits, exit, transfers and disputes.
We will prepare or amend the constitution so it works with the agreement rather than against it.
We will advise on provisions specific to your industry or ownership arrangement.
We will prepare the related documents, including employment terms for owners who work in the business.

It works on trust, and nothing is in writing

You own the business with one or two other people. It is going reasonably well and the working relationship is good. There is nothing in writing beyond what was said at the start, and you have noticed that none of you actually knows what would happen if one wanted out, or got sick, or received an offer for their share. You have thought about raising it and put it off, partly because it feels like a strange thing to raise while nothing is wrong. Which is exactly the condition under which it can be raised.

What's included in your shareholders agreement service

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A facilitated session with the owners to settle the key terms.
A shareholders or owners agreement drafted to what you agreed.
Constitution prepared or amended to align with it.
Exit, valuation, transfer restriction and dispute resolution mechanisms.
Deeds of accession so owners who join later are bound too.

What it costs to work it out afterwards

Businesses without an agreement do not fail on the day of the argument. They fail slowly afterwards. One owner wants out and there is no agreed way to value their share, so the valuation becomes the dispute and takes months. Another wants to bring in an investor and nobody can stop them, because nothing restricts who shares may be transferred to. An owner dies and their spouse inherits, and the survivors find themselves in business with somebody who has never worked there and wants to be paid out.

The legal costs are the smaller half. The larger half is that the business stops being run while the owners argue, staff and customers notice, and the relationship that made it work does not survive the process. Nearly all of it traces back to the absence of a document that would have taken a few weeks and a fraction of the eventual fees.

From an understanding to an agreement

We get the questions onto the table, which is most of the work. How decisions are made and which ones need everybody. How profits are taken, and whether owners who work in the business are paid separately for that. What happens when somebody wants to sell, who gets first refusal, and how the price is set. What happens on death, illness or a marriage breakdown. Whether an owner who leaves can compete.

Most owners find they agree on more than they expected. The value of the exercise is in locating the two or three points where they do not, while there is still enough goodwill to settle them. We then draft the agreement to reflect what you actually decided, tailor the constitution so the two documents work together rather than against each other, and get it signed by everybody, with a mechanism that binds any owner who joins later.

How we get it agreed

From an understanding between you to a document everybody has signed.

Get it on the table

We work through decisions, profits, exit, transfers and disputes with all the owners and find where you do not yet agree.

Draft what you agreed

We prepare the agreement and align the constitution with it, so the two documents work together rather than in conflict.

Sign and bind

We execute the documents with every owner and put a mechanism in place so anyone who joins later is bound as well.

Agreements drafted by Accredited Specialists in Business Law

Raising this with a business partner feels like an accusation, and that is the single biggest reason it does not get done. In practice it reads as the opposite. Owners who have settled what happens in advance handle growth, exits and bad years far better than owners relying on goodwill, because goodwill is precisely what runs out under pressure.

We have 2 Accredited Specialists in Business Law, and we also have 2 Family Business Association accredited advisors, which matters when the co-owners are related to each other and the commercial conversation is also a family one. We will run the conversation as well as draft the document, because the drafting is the easy half.

Our great lawyer guarantee

Six principles we hold to, whatever you bring us and however long it takes.

Take the time

We listen carefully to understand what you want to achieve, then step you through the advice and the documents.

Share our knowledge

We pass on as much as we can, so you can make your own informed decisions.

Stick to our knitting

We only do what we are good at, so you never pay for our learning.

Work as one team

Someone is always available to answer your question or point you the right way.

Fair pricing

A fixed or capped quote for advice and documents, so you do not carry the price risk.

It is your show

We are in it for a front row seat to witness your success, not for our egos.

Get it agreed while everybody still agrees

Tell us who the owners are and how the business runs between you. We will put the questions that matter on the table, find the two or three where you do not yet agree, and turn the rest into a document everybody signs.

Speak to a lawyer 1300 654 590