5 Key Reasons for a Shareholders Agreement

2 min read

As a business law firm, Priority Business Lawyers is often approached by disgruntled shareholders and directors seeking a solution to a dispute that they are having with other key stakeholders in the business. Often one of the first questions we ask is: “Do you have a Shareholders Agreement?” Invariably the answer is “no”. We then generally advise them that unless they can mediate the dispute the matter will end up in litigation and no one will win other than the lawyers! This is obviously totally unsatisfactory to all concerned. It begs the question why not a Shareholders Agreement?

The key five reasons for having such an agreement are:

1. It provides certainty – It will set out generally the rules by which the company will be governed and the rights and obligations of individual shareholders and directors in the running of the business.

2. It can avoid litigation – By having a well crafted dispute resolution clause in the agreement and certainty about other aspects of the business and administration of the company, then the parties have a methodology by which to resolve their disputes.

3. It provides checks and balances – The rights of all shareholders including those in minority can be protected and rogue activity by unreasonable directors and/or shareholders may be checked by ensuring that there are several restrictions imposed on conduct and behaviour in the running of the enterprise.

4. It provides a succession plan – One of the essential features of a well drafted Shareholders Agreement is to deal with a succession plan including a procedure for selling or buying shares and the  introduction of potential new shareholders. Failure to do so can result in catastrophic circumstances where you might end up in tears as a result of having to finance the buyout or even worse, having a business relationship with a relative of a shareholder like a wife, husband or child you do not wish to deal with.

5. It provides an opportunity – Often business people including shareholders do not make provision for catastrophic events such as temporary and permanent disablement and death. A well drafted Shareholders Agreement can incorporate within its provisions requirements for the company to fund the premiums of key man and, life and TPD insurance for the benefit of all concerned.

At PBL we are regularly instructed to draft Shareholders Agreements for business people.

If you have not turned your mind to it, now might be an appropriate time to consider the preparation of a Shareholders Agreement. It will provide peace of mind and an opportunity to deal with important issues in the business.

For further information phone 4305 3500 or Contact David

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Authored By
PBLTeam

Director Lawyer, PBL Law Group

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Anita Bradley has been an absolute dream to deal with. Anita's conveyancing skills and knowledge knows absolutely no boundaries along with her effective communication skills which has made selling and buying a completely stress free exchange for us. We recommend PBL Law to everyone looking for outstanding service. We will definitely be returning clients.
Kushlan Aluwihare
PBL Law Group were fantastic. Anita from PBL worked with us closely during our property search and made the exchange and settlement process smooth and stress free. Highly recommended.
Gail Whitford
PBL handled my late mothers estate, they were very obliging and patient with any and all questions that we had, thank you to David , Sharon and the other staff that we dealt with, everyone was so easy to talk to and friendly .David came to the home where my Mother was living and helped her to get her will in order, Sharon helped us through the process of executing her wishes when the time came even doing a house call which was so much easier, thank you all so much
S M
I have experienced an excellent service from PBL (especially from Anita) during the sale of my recent property on Central Coast, and during the purchase of our current property in Sydney. Throughout many challengers, especially with the sale, Anita presented her very professional and knowledgeable conveyancer, positively solving all obstacles. "Above and Beyond" Award going to Anita!!! :-)
Amanda Reitzin
The five-star reviews are well-deserved. I needed a motion and a bylaw drawn up for urgent repairs of my strata unit and the AGM was in two weeks' time. My solicitor was friendly, efficient, knew what documents to ask for, and had all the paperwork prepared well within the timeframe. She also took the time to run through all the legalese and the different possible scenarios with me to make sure I understood. I am so glad to have found this firm and I will not hesitate to use their services again in future if the need arises.
Ricky Cooper
Anita is amazing! So attentive, approachable and communicates everything every step of the way. I have now bought and sold property with Anita and I cannot recommend her highly enough.
Ron Thomsen
Our Commercial Property conveyancing was handled very professionally. Anita’s experience and responsiveness was an asset in this transaction.
Trace M
I am so grateful for Anita Bradley from PBL Law Group helped me with this property settlement, she has went above beyond to ensure I understand everything because of our deafness. I will recommended Anita or their team. Thank you so much for all the hard work you have done for us.
Tricia Wheatstone
For almost 18 months I have been a client of Alex Ilkin. Alex is very knowledgeable and professional and has consistently provided me with thorough, honest and well set out advice, including steering my case through appeal proceedings. He always worked for my best interests with integrity and compassion. I recommend Alex and his team at PBL.