Starting a new company is an exciting time which also typically involves other stakeholders, such as, friends, families, colleagues or investors. For this reason, it is strongly advised to have a shareholder agreement in place as it may save you a lot of headaches and frustration down the road.

A shareholders agreement is essentially a business pre-nup agreement. It is an essential document that sets out the relationships between the shareholders and directors of the company and is what the directors of the company refer to when making important decisions about the company.

Without a shareholders’ agreement, your company will refer to the rules in its constitution (if it has one) and the replaceable rules provisions under the Corporations Act 2001.

Ideally, shareholders agreements are best prepared at the commencement of the corporate business. They should also be constantly reviewed to ensure it remains relevant with the growth of the business.

Benefits of Shareholders Agreement

Here are some of the benefits of entering a shareholders agreement:

- It forces the parties to consider the procedures which the company and the shareholders will follow if certain events occur (e.g. death or incapacity of the shareholder)

- If prepared at the commencement of the company, then it allows shareholders to address critical issues at the outset rather than as such issues arise

- It can assist the shareholders to avoid or minimise disputes through the adoption of predetermined dispute resolution procedures and avoid or reduce the costs associated with any disputes

- It provides control measures which can assist the comapny avoid unplanned expenditures, indebtedness or other outgoings; and

- It can document an exit strategy for some or all shareholders.

A shareholders agreement does not cover everything. It can depend on the structure, specific commercial requirements, and individual circumstances. You may also need to consider reviewing, updating or seeking legal advice on other commercial and corporate documents.

Here are some other commercial and corporate documents you should consider:

 - Director/Executive  Agreements

 - Buy/Sell Agreement

 - Company Constitution

 - Corporate Governance

 - Company Secretarial

 - Board Policies

 - Conflicts of Interest

 - Business Structuring

 - Loan  Agreements

 - IP Agreements and Protection Strategies

 - Business Succession Planning

 - Asset Protection and Estate Planning

 - Resolutions for share sales, buy backs, splits

If you have legal inquiries regarding shareholders agreement or preparing other types of commercial agreement(s), feel free to contact Longton Legal Melbourne office via our office number, 03 9670 1199.

*Disclaimer：This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*