About the Shareholders Agreement Precedent

The Shareholders Agreement Precedent is a precedent shareholders agreement. A shareholders agreement is an agreement between shareholders in a company and details how directors are appointed and removed and their roles and responsibilities. It also sets out how the company should be managed, how disputes should be resolved and the rules around issuing shares and selling shares.

This precedent:

• is in word to easily use and badge as your own      

• requires that it be related to an Australian company with a minimum of one shareholder and one director. One director must be an Australian resident.

• assumes each shareholder to be a party to the agreement is a member of the company and must either be an individual or a company, noting shares can be held in trust, eg Jane Doe as trustee for the Doe Family Trust or Doe Pty Ltd as trustee for the Doe Family Trust.

• Contains Schedules to add in share allocations (noting your company should also have a constitution and the constitution) as well as tailor the matters reserved for shareholders (as opposed to directors) where shareholders and directors are different.

The document has an easy-to-read schedule for shareholder and company details, jurisdiction and date, and clauses relating to:

• definitions & interpretation

• operation and relationship with the constitution

• the board

• quorum of shareholders meeting

• matters reserved for shareholders

• drag along and tag along rights

• permitted disposals

• deadlock

• default and events of defaults

• termination

• further funding

• dividend policy

• financial reporting

• non compete clause

• confidentiality clause

• communications

• legal costs

• schedules with forms to use for transfer, accession, and offers.

How to use this precedent

To complete this precedent, it requires you to complete the items in red text in the agreement after obtaining instructions from your client, noting the red text is in the following parts:

o   Optional clause definitions (clause 1.1) and clause 9 – remove these where not required

o   Clauses 3.3, 3.4, 3.6, 3.8 and 4

o   The schedules, noting schedules 1 and 2 require completion but schedules 3 – 6 inclusive are the form of notice etc required once certain events contemplated by the Shareholders agreement take place and are to stay as “template” forms, hence they are not in red text; and

o   The execution clause – you will need to select and use the correct execution clauses depending on whether the shareholders are individuals or companies.

Note that this is a general precedent drafted for Australian laws and does not incorporate any specific arrangements such as subscription agreements to bring in investors over time or deal with employee shareholder vesting agreements etc. If you do want something more complex, a new or expanded precedent will need to be obtained.

If you need further assistance

If you have questions, please get in touch with us via bossteam@readytobosslegal.com

Disclaimer

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