Shareholder Agreements.
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The first step is to plan before you document any agreement.
This includes shareholder rights, contributions, their funding, their business exit plans, business expansion and investors, operational control and dividend expectations.
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We can draft the initial Shareholder Agreement.
This document often includes clauses about the distribution of dividends, the management of the company, voting rights, what happens if a shareholder wants to sell their shares, and what happens in the event of a shareholder's death or incapacitation.
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We can assist in negotiating the terms of the Agreement.
This can include issues such as the valuation of shares, the procedure for dispute resolution, the appointment and removal of directors, etc.
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If an Agreement is already in place, we can review it to ensure that it is legally sound, fair, and in the client's best interest. We can propose amendments if necessary with the other shareholders based on everyone’s different goals and stage in life.
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If disputes arise among shareholders, we can provide advice on the interpretation of the Shareholder Agreement and represent a shareholder or the company in discussions or negotiations.
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We ensure that the Shareholder Agreement is in compliance with applicable laws and regulations, including ASIC.
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Your Legal HQ can provide advice on the optimal structure for the company or the shareholder’s shareholding structure to meet the shareholders' goals and to provide for efficient operation of the business, tax planning and asset protection.
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We provide advice and incorporate provisions on various exit strategies, such as the sale of the company, initial public offerings, or buy-sell provisions among shareholders.
How we can help
What are they?
A Shareholders Agreement is a legal document that sets out the rights, responsibilities, liabilities, and obligations of the shareholders of a company. This agreement is negotiated among shareholders to protect their interests and to define how the company will be operated. While it is not legally required, it is highly advisable for companies with more than one shareholder.
The shareholders agreement typically complements the company's articles of association and other corporate documents, offering more detailed and specific provisions about the governance of the company and the interaction between shareholders.
Why do I need one?
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Shareholders agreements typically contain provisions about how disputes among shareholders or between shareholders and the company will be resolved. This can help avoid costly litigation and ensure a fair process for all parties involved.
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Shareholder Agreements can specify how decisions are made within the company. This could include day-to-day management decisions, as well as significant decisions like issuing new shares, taking on debt, or selling the company. It ensures that all shareholders understand their role in the company's decision-making processes.
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Without a Shareholders Agreement, minority shareholders might have little influence over the direction of the company. A well-drafted shareholders agreement can provide protections for minority shareholders, such as anti-dilution provisions or the requirement for certain decisions to be unanimous.
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A Shareholders Agreement can contain restrictions on the transfer of shares, such as right of first refusal, tag-along rights, or drag-along rights. This helps to maintain stability in the company's ownership and prevents unwanted third parties from becoming shareholders.
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A Shareholders Agreement can outline what happens if a shareholder wants to leave the company, or in the event of a shareholder's death or incapacity. This can provide certainty and avoid disputes in these situations.
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The agreement can include confidentiality clauses to protect sensitive company information.
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The agreement can set out when and how dividends will be distributed to shareholders.
Unless you have a Shareholder Agreement there is a risk that business partners who were the best of friends could end up as enemies when one owner wants to leave and the other co-owner is left scrambling to find the money to pay them out.
Having a Shareholder Agreement allows the owners and shareholders to regulate each and every type of buy-out, by setting out:
the price - so that neither side can exert leverage on the other;
the payment terms - so that the seller’s cash needs are met whilst ensuring that the buyer can afford it; and
the rules - if either side reneges on their obligations.
Just buying a Shareholder Agreement off the shelf might be dangerous if no one has given any thought on what each person needs or what they can afford. In fact, you might just end up with an array of legal rights which you simply can’t afford to invoke. Contrary to the prevailing lawyers’ logic, numbers do matter. They matter a lot.
That is why Your Legal HQ treats each Shareholder Agreement as a custom exercise to ensure that the numbers are properly crunched to form a solid foundation for the buy-out procedure.