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Buy shares from an existing shareholder

We will help you buy into an existing company with the due diligence and the rights you need to protect the investment.

Buying shares from an existing shareholder means joining a company that already has a way of doing things. You inherit its history, its constitution and whatever the other owners have agreed between them. Price is the easy part. The harder questions are what the shares actually entitle you to and whether the transfer can proceed at all. Then there is what happens the first time you disagree with the people you have just joined. We act for incoming shareholders on all of it.

Speak to a lawyer What is included

Rights you can name

You know what the shares entitle you to before you pay for them, not afterwards.

A transfer that holds

Pre-emptive rights and constitutional requirements are dealt with, so the sale cannot be unwound.

A way back out

Exit and valuation terms are agreed while you still have the position to ask for them.

What are you actually buying when you buy someone else's shares?

A share is a bundle of rights, not a slice of the profits alone. What is in the bundle depends on the company’s constitution and on any shareholders agreement the owners have signed. The Corporations Act 2001 (Cth) (the Act) fills the gaps where those documents are silent. Two parcels of shares in the same company can carry very different rights.

A secondary purchase, where you buy from an existing holder rather than from the company, has two extra features. The money goes to the seller and not into the business, so the company gains nothing from the transaction. The existing shareholders may also have a right to be offered those shares first, which can stop the sale before it starts. What a parcel is worth depends on the rights attached to it and on how easily you could ever sell it again.

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Do the other shareholders have to agree to the sale?

Often yes. Most constitutions and shareholders agreements give existing holders a right of first refusal, and some require director approval for any transfer. Those steps have to be followed properly, because a transfer made around them can be challenged later.

Is buying shares from a shareholder different from buying new shares from the company?

Yes. If you buy from a shareholder, the money goes to that person and the company receives nothing. If the company issues new shares to you, the money goes into the business and every existing holding is diluted. The tax and duty treatment differs too.

Do I need a shareholders agreement if I am buying a minority stake?

That is when you need one most. Without it, a minority holder has very little say over dividends, board seats, information or what happens if the majority wants to sell. The time to ask is before you buy, because afterwards you have nothing to bargain with.

How much due diligence is worth doing on a small shareholding?

Enough to match what you are risking. At a minimum, read the constitution and any shareholders agreement, check the company’s filings and tax position, and ask about disputes and related party loans. A full diligence exercise is rarely proportionate for a small parcel.

Know what the shares entitle you to before you pay for them

Send us the constitution and any shareholders agreement. We will tell you what you would be buying, what the other owners can do to you, and what needs to change before you sign.

You are buying the shares, and everything that happened before them

You have agreed a price with the shareholder who is selling. What you have not checked is whether the constitution permits the transfer, or whether the other shareholders have to be offered the shares first. Nor what the company itself owes.

There is also the part nobody raises in the negotiation. Once you own the shares you are in business with the remaining owners, on terms they agreed before you arrived.

We will review the constitution and any shareholders agreement and tell you what the shares carry.
We will confirm whether a right of first refusal applies and manage the process if it does.
We will run due diligence on the company sized to what you are paying.
We will prepare or negotiate the share purchase agreement and the seller's warranties.
We will negotiate the shareholder protections you need before completion.

You have the chance to buy in, and the seller wants an answer

Someone is getting out. You have been offered their shareholding. Either you already work in the business, or you know it well enough to want a piece of it. The price sounds reasonable and the remaining owners seem happy for you to come in. Nobody has shown you the constitution, the shareholders agreement or the last set of accounts, and the seller would like this done quickly.

What's included in your share acquisition service

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Constitution and shareholders agreement review.
Pre-emptive rights and transfer mechanics advice.
Legal due diligence on the target company.
Share purchase agreement preparation and negotiation.
Negotiation of information, board and exit rights.
Completion and share register update.

What goes wrong when you buy in on a handshake

The problems in a secondary share purchase surface slowly. A minority holder with no shareholders agreement has no right to a seat on the board. There is no right to information beyond the annual accounts, and no way to force a dividend. Profits get taken as salary by the owners who work in the business, and the minority holder watches.

Getting out is worse than getting in. Without a pre-agreed exit mechanism, nobody is obliged to buy your shares, and there is no market for a minority parcel in a private company. Meanwhile the liabilities the company carried before you arrived are now partly yours. An unpaid tax assessment or a dispute with a former employee reduces the value of what you bought.

How we get you in with your position secured

We read the constitution and any shareholders agreement first, because they decide what the shares are worth and whether the sale can happen at all. If a right of first refusal applies, we make sure the process is followed, so the transfer cannot be unwound later.

Then we run due diligence proportionate to what you are paying. Contracts, tax position, litigation, and the company’s dealings with its own directors. We put the seller’s promises about the company into the share purchase agreement, so a misstatement is a claim rather than a disappointment. Where there is no shareholders agreement, or the existing one leaves a minority holder with nothing, we negotiate the terms you need. That happens before the money moves. You end up a shareholder with defined rights, not just a name on the register.

How you buy in safely

The rights are secured before the money moves, not negotiated afterwards.

Read the rules

We review the constitution, the shareholders agreement and any pre-emptive rights that control whether the transfer can proceed.

Check the company

We run due diligence on contracts, tax, litigation and related party dealings, sized to what you are paying.

Secure your rights

We negotiate the purchase agreement and the shareholder protections you need, then complete the transfer and update the register.

Lawyers who read the shareholders agreement before you sign the cheque

Buying into a business you already know well is the transaction people are most likely to do on trust. You like the people, you have seen the numbers from the inside, and asking for documents feels like a slight. It is not, and owners who have done this before will expect it.

We act for incoming shareholders in closely held companies, where the real questions are rarely about price. They are about information rights, what happens when the majority wants to sell, and how you ever get your money back out. We raise those before you are committed, because afterwards they are somebody else’s decision.

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.

Buy in with your position defined

Send us the constitution, any shareholders agreement, and whatever the seller has told you about the company. We will tell you what the shares actually entitle you to and what has to change before you buy them.

Speak to a lawyer 1300 654 590