Shareholders Agreement

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Shareholders Agreement

A Shareholders Agreement is a contract between some or all of the shareholders in a company. In many cases, the company is also a party to the Agreement.

A Shareholders Agreement is different from a Company Constitution, although the two documents have many things in common. Under the Corporations Act 2001 a Company Constitution is compulsory, while a Shareholders Agreement is not. However, a Shareholders Agreement is a valuable document which can help to set out the various rights and obligations of the shareholders, and can clarify many details about how the company will operate.

Given the variety of forms that companies can take, Shareholders Agreements also can vary significantly. Some of the details which may be provided in this document include:

• the number of shares held by each shareholder
• details of different share classes
• provisions relating to share issues and share transfers
• provisions relating to future capital injection
• provisions dealing with shareholders exiting the company
• details of any of first refusal for shareholders in buying shares from other shareholders
• "drag along rights" and "tag along rights"
• provisions relating to voting blocks / pacts
• details of any dividend policy
• provisions relating to appointment of directors, removal of directors, obligations of directors and director salaries
• details of shareholder lock-in periods

How to Use This Document

In order to ensure that this Shareholders Agreement is compatible with the Company Constitution, it is a good idea to review the Company Constitution before finalising this Agreement. Many sections of this Agreement deal with information that is also addressed in the Company Constitution. If not checked carefully, there may be conflicts or contradictions between the two documents.

Once the Agreement has been prepared, each party may be given a copy of the Agreement so that they can read it. If each party is happy with the Agreement they can sign it and have their signatures witnessed by an independent adult person.

Each party may keep a copy of the Agreement for their own records.

Applicable Law

The Corporations Act 2001 (Commonwealth) governs the operation of companies in Australia.

As this Shareholders Agreement is a contract between the various parties to the Agreement, general principles of contract law, as provided by the common law, also apply.

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Other names for the document: Agreement between Shareholders, Business Will, Company Will, Founders Agreement, Shareholder Agreement

Country: Australia

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