Do I need a Shareholders' Agreement?

Who this is for

A Shareholders' Agreement is one of the most important documents you can have in place and ideally, you want it sorted before you actually need it. This type of agreement matters for any business with two or more owners. That includes co-founders going into business together, established companies bringing in new investors or partners, and family businesses where ownership is shared across relatives. If more than one person (or entity) holds shares in your company, then this applies to you.

What is a Shareholders' Agreement, and why does it matter?

When you set up a company that issues shares, it will have shareholders and a share capital. As ASIC explains, a share represents part ownership of a company, and the way that ownership is divided among shareholders is known as the share structure.

The rights and obligations attaching to those shares can be set out in a few places: the replaceable rules in the Corporations Act, the company's constitution, or a Shareholders' Agreement. Without this agreement, your company falls back on the default rules, which are too broad and rarely reflect how your business actually works, or what's previously been agreed on.

A Shareholders Agreement is a private contract between the owners that sets out how the company is run, how the decisions are made, and what happens when someone wants to leave. It protects your business relationships with carefully structured terms that reduce uncertainty and provide clear pathways for dispute resolution, before anything goes wrong.

What happens without one?

Ask yourself, what happens to my business if I can no longer run it?

Without a succession plan or a Shareholders' Agreement, your business could face a leadership gap, unwanted new owners, a deadlock, or even be forced to sell during a crisis. This crisis could be caused by the death of a shareholder, a serious illness, a relationship breakdown between owners, or just one party wanting out.

Disputes escalate quickly, and without an agreed process, they often end up being resolved slowly and costly, in court.

A well-drafted agreement protects you. It can establish buy-sell arrangements and transition structures that protect both your business continuity and your family's financial security, so a difficult situation doesn't become a catastrophic one.

What a good Shareholders' Agreement covers

A strong agreement usually addresses things like:

• How major decisions are made, and what needs unanimous or majority approval
• What happens if a shareholder wants to sell, exit, or is no longer able to be involved
• Buy-sell provisions and how shares are valued
• How new shareholders or investors can be brought in
• Dividend policy and how profits are distributed
• How disputes between shareholders are resolved

What else our commercial team can help with

A Shareholders' Agreement is just one part of keeping your business protected. Our Perth-based commercial team works with business owners, entrepreneurs, and investors at every stage, providing clear, commercially focused advice that helps you make confident decisions. We can help with business and corporate advisory, mergers, acquisitions and business sales, and corporate governance and compliance, guiding you through everything from new ventures and complex transactions to the frameworks that keep your business compliant and set up for growth.

Ongoing legal support

A Shareholder's Agreement is exactly the kind of thing we roll into our ongoing legal support for business clients. It sits alongside the rest of your commercial and corporate arrangements as part of a properly protected business. Through a tailored retainer, we treat your agreement as one part of the bigger picture. Ongoing legal support includes protecting your business assets, as well as reviewing and updating agreements and documents as your circumstances change. This support includes proactive action from our team, not just revisiting things when something has gone wrong.

A Shareholders' Agreement is one of those documents that feels easy to put off, right up until the moment you desperately need it. By then, it's often too late to do much about it. Getting one properly drafted while everyone is on good terms and thinking clearly is far easier, and cheaper, than having a dispute later.

If you're a business owner in Perth wondering whether you need a Shareholders' Agreement, or your existing one hasn't been looked at in years, our commercial team can help. We'll take the time to understand your business and put the right structures in place to protect it. You can contact us here.