What is a shareholder agreement?
Shareholder agreement is a legal agreement between the shareholder of the company, and it records the details about the running of the affairs of the company. Shareholder agreement is not compulsory, but it avoids the confusion and disputes between the shareholders. Shareholder agreement develops the understanding between the shareholders. It is a document that provides the solution where the corporation law is silent.
Constitution of the company
Shareholder agreement must cover those matters which are not covered by the constitution of the company. The shareholder agreement is a supplementary document of the company’s constitution. The shareholder agreement provides the right and liabilities in addition to mentioned in Corporation Act (CTH) 2001.
Necessity of shareholder agreement
The company constitution does not provide the procedure for selling of shares on retirement, death, disability or on any other reason. The company constitution is often silent, and the shareholder agreement provides the procedure for internal affairs of the company. Shareholder agreement is best suitable for the private companies. Shareholders have a great control over the affairs of the company as compare to the shareholders of the public companies. Shareholder agreement provides the smooth running of the affairs of the company.
The company constitution provides the details about the running of the company in a broad way but shareholder agreement provides the comprehensive details and covers all issues which are related with internal affairs of the company.
Requirements of the Corporation Act (CTH) 2001
The corporation Act) (CTH) 2001 does not require the company to have a shareholder agreement in place. Shareholder agreement is a very flexible and confidential document. Shareholder agreement does not need to be registered at Australian Securities and Investment commission (AISC).
Rights and obligation
Shareholder agreement is also known as stakeholder agreement, and it protects the rights of the shareholder. The private companies usually use the shareholder agreement along with company’s constitution for the following purpose. Such as:
• It is a private document and confidential remains within the company;
• It allows great flexibility and also protects the minority of shareholders;
• It avoids the disputes amongst the shareholders and ensures the smooth running of the affairs of the company.
Shareholder agreement minimises the disputes between shareholders because it provides the solution for resolving the disputes. Shareholder agreement is binding on the shareholders, and it further regulates the affairs which are not governed by the company’s constitution.
Protection of minority of shareholders
Shareholder agreement provides the equal protection to the minority of the shareholder. Shareholder agreement confirms and ensures the rights and obligation of the shareholders. The company constitution provides the limited rights to the minority of the shareholders .In the absence of shareholder agreement; the minority shareholders will seek the court assistance if they have a complaint about the managing process of the company. So shareholder agreement minimises such disputes.
Amendment in shareholder agreement
Shareholder agreement provides full protection to rights of the shareholders because it is not easy to amend the shareholder agreement. It accepts only such amendments which are based on unanimous decisions. The company constitution can be amended by 75 % of the votes.
Superiority of the shareholder agreement
The shareholder agreement has superiority over the company constitution. In case of conflicts between the two documents, the provisions of the shareholder agreement will be prevailed.
Net Lawman provides the following shareholder agreements. Such as:
Shareholders' agreement: new company; one shareholder is major lender
A comprehensive shareholders agreement for a new company that has also been financed with debt from a big lender as well as equity. Use this agreement to protect the rights of each shareholder against each other and the debt provider and also for setting down the strategic management of the company. This agreement could be put in place at the time of incorporation or shortly afterwards in order to set out the balance of shareholder power as the company grows. It is suitable for companies where all or some shareholders are also directors, or where there is a mix of active and inactive owners.
Shareholders' agreement: existing company; one shareholder is major lender
A comprehensive shareholders agreement for an existing company that also has debt financing from a big lender such as a business angel or venture capitalist. Use this agreement to protect the rights of each shareholder against each other and the debt provider and also for setting down the strategic management of the company. This agreement could be put in place perhaps on the introduction of new shareholders or directors, a new financing round, or after restructuring, or simply to redress the balance of shareholder power as the company grows. It is suitable for companies where all or some shareholders are also directors, or where there is a mix of active and inactive owners.
Shareholders' agreement: existing company; shareholder-directors
A comprehensive shareholders agreement for an existing company. Use this agreement to protect the rights of each shareholder against each other and also for setting down the strategic management of the company. This agreement could be put in place perhaps on the introduction of new shareholders or directors, a new financing round, or after restructuring, or simply to redress the balance of shareholder power as the company grows. It is suitable for companies where all or some shareholders are also directors, or where there is a mix of active and inactive owners.
Shareholders' agreement: new company; shareholder-directors
A comprehensive shareholders agreement for a new company. Use this agreement to protect the rights of each shareholder against each other and also for setting down the strategic management of the company. This agreement could be put in place at the time of incorporation or shortly afterwards in order to set out the balance of shareholder power as the company grows. It is suitable for companies where all or some shareholders are also directors, or where there is a mix of active and inactive owners.
Share transfer form: private company
This document creates a transfer, sale or purchase of shares in a private Australian company. To affect the legal transfer of shares in an Australian company listed on the stock market, you will need a stock broker.
Editors’ notes:
For more information please visit www.netlawman.com.au or contact Rashid Ramay on support@netlawman.co.uk
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