Shareholders Agreement Lawyers
A shareholders agreement is one of the most important documents a company with more than one owner can have. Sierra Legal drafts, reviews and negotiates shareholders agreements for founders, family businesses, joint ventures and investors across Melbourne, Brisbane and Newcastle — so ownership, control and exit are clear before anything goes wrong.
Key Takeaways.
- A shareholders agreement is a private contract setting out how owners run, fund and exit the company.
- Recommended for any company with more than one shareholder.
- Covers decisions, share transfers (pre-emptive, drag-along, tag-along), funding, dividends, founder/leaver terms, deadlock and exit.
- Without one, disputes fall back to the company constitution and the Corporations Act (oppression or winding up) — costly and uncertain.
- Best put in place early, while shareholders are aligned.
What a Shareholders Agreement Covers.
A well-drafted agreement sets the rules while owners are aligned, so disagreements later follow an agreed process. Typical provisions include:
- Decision-making & control — which decisions the board can make and which need shareholder or special approval (reserved matters), and board composition.
- Share transfers — pre-emptive rights, plus drag-along and tag-along rights so minority and majority owners are protected when shares change hands.
- Founder & leaver provisions — vesting, and what happens to a departing shareholder’s shares (good leaver / bad leaver).
- Funding & dividends — how further capital is raised and how profits are distributed.
- Deadlock & dispute resolution — casting votes, buy-sell (“shotgun”) clauses, mediation and exit mechanisms so disagreements are resolved by an agreed process, not litigation.
- Confidentiality & restraints — protecting the company’s information and limiting competing conduct by shareholders.
Why It Matters.
Without a shareholders agreement, the relationship between owners is governed only by the company constitution and the default rules in the Corporations Act 2001 (Cth). When owners fall out, that can leave the statutory oppression remedy (sections 232–234) or a winding-up application as the only options — slow, expensive and uncertain. A clear agreement, negotiated up front, is far cheaper than a dispute. For director and shareholder obligations generally, see ASIC.
Shareholders agreements also sit at the centre of capital raises and M&A transactions — we align them with your constitution, term sheets and transaction documents.
Frequently Asked Questions.
What is a shareholders agreement?
A shareholders agreement is a private contract between a company’s shareholders that sets out how the company is owned, run and exited. It governs decision-making, share transfers, funding, dividends and what happens if owners fall out — filling gaps the company constitution and the Corporations Act leave open.
Do I need a shareholders agreement?
If your company has more than one shareholder, almost certainly. It protects each owner, sets clear rules for decisions and disputes, and controls who can buy or sell shares. Without one you fall back on the company constitution and the Corporations Act — a blunt, costly default when relationships sour.
What’s the difference between a shareholders agreement and a company constitution?
The constitution is the company’s governing document (or the Corporations Act’s replaceable rules if you have none). A shareholders agreement is a private contract between the owners. It can bind shareholders on matters the constitution does not cover — like funding, exits and deadlock — and usually prevails between them.
What does a shareholders agreement include?
Typically: how decisions are made and which need special approval, board composition, dividend policy, how shares can be transferred (pre-emptive rights, drag-along and tag-along), founder and leaver provisions, funding obligations, confidentiality and restraints, and mechanisms to break deadlocks and resolve disputes.
What happens if shareholders deadlock or fall out?
Without an agreement, disputes can end in an oppression claim or winding up under the Corporations Act — slow and expensive. A well-drafted shareholders agreement builds in deadlock-breaking mechanisms (casting votes, buy-sell or “shotgun” clauses, mediation and exit rights) so disagreements follow an agreed process, not litigation.
When should we put one in place?
As early as possible — ideally when the company is formed or when new shareholders or investors come on board. It is far easier to agree the rules while everyone is aligned than after a dispute has started. We can also prepare one for an established company that never had it.