Australianbiz Accountants Q & A Forum

Disclaimer: Information posted on this forum represents the views of the registered members and is not intended to constitute professional advice. Members should not act on this information without proper advice from a suitably qualified professional. Australianbiz and the administrators of this forum take no responsibility and accept no liability for the validity or accuracy of this information.
THE FORUM IS FOR QUESTIONS & ANSWERS NOT FOR STATEMENTS
Members Login
Username 
 
Password 
    Remember Me  
Australianbiz Accountants Forum → Sample Questions & Answers → Importance of Having a Shareholders Agreement
 

Topic: Importance of Having a Shareholders Agreement

Page 1 of 1  sorted by
admin
Moderator
Status: Offline
Posts: 43
Date:

Importance of Having a Shareholders Agreement
Permalink  
 

I'm about to incorporate a company with a number of other shareholders, do I really need a Shareholders Agreement?



__________________

Australianbiz is an online resource for Australian small businesses that provides an extensive range of tax and financial management tools. The site is also a useful resource for practising accountants. 

Click here to access the site. 
admin
Moderator
Status: Offline
Posts: 43
Date:
Permalink  
 

The answer is a definitive yes. A shareholders agreement is simply a contract between shareholders of a company. It deals with the rights of shareholders and the operation of the company and is an important management tool for shareholders. The following issues are commonly dealt with in a Shareholders Agreement:                                                                             

  • Restraints of Trade
  • Voting rights
  • Directors Duties
  • Buy out strategies
  • Exit events
  • Mandatory sale events – noting specific events that trigger a mandatory sale of shares, such as death 

Not having a Shareholders Agreement is risky. It exposes shareholders to a range of disputes. For example, not having a Shareholders Agreement means there is no process in place dealing with the exit of shareholders which then raises potential of conflict when a shareholder is looking to exit.  By providing certainty concerning the operation of a company a Shareholders Agreement will help reduce the risk of disputes between shareholders, as their rights and obligations are spelt out. A potential outcome of shareholder dispute is the ultimate winding up of a company. This is an outcome to be avoided.



__________________

Australianbiz is an online resource for Australian small businesses that provides an extensive range of tax and financial management tools. The site is also a useful resource for practising accountants. 

Click here to access the site. 
Page 1 of 1  sorted by
Quick Reply

Please log in to post quick replies.
 
A service provided for members of Australianbiz, visit the website: https://australianbiz.com.au/