The process of creating and maintaining a business is one of the most challenging yet fulfilling experiences that any human can go through.
As a decision-maker yourself, you likely already know that running a tight and profitable ship can be a tall order because of many things that need to be handled every single day. Accounting matters, operational improvements, marketing and sales work—the list of matters that are integral to your success is nearly endless.
On the legal side of things, the Australian government’s standard for businesses yields its fair share of complications. And there’s one particular issue whose value may pique your interest: the shareholders’ agreement.
What Is a Shareholders’ Agreement?
The concept of shareholders’ agreements isn’t entirely new for Australian business owners because they are commonly mentioned in guides, brought up in the news, and talked about during mixers. However, most decision-makers aren’t familiar with its many ins and outs and why it is crucial for corporate success.
A shareholders’ agreement is a contract that addresses the management and establishes rights and obligations between shareholders of a company. This legal document must be tailored to the specific needs of a company, its business, and involved shareholders.
What Do Shareholders’ Agreements Address?
A shareholders’ agreement is established and enforced for various purposes pertinent to the structural concerns of investors. In a professionally drafted document, the most common and vital matters addressed are as follows:
- Exit strategies for the shareholders, such as the agreement to sell shares on particular occurrences like the death of a founder or an offer to acquire the company
- Expectations of working owners
- How company directors are appointed and removed
- Voting rights of both the directors and shareholders
- The dividend distribution policy for profits of the company
- The requirement and conditions of any shareholder loans
- The restrictions on the competition with the company
Why Are Shareholders’ Agreements Important?
Shareholders’ agreements are important because their purpose is rudimentary. It’s an extremely valuable document because it protects the interests of shareholders and guides the future of a company. With this key point of reference, a company can outline the rights and obligations of its shareholders and key persons. When drafted appropriately, this document can be used to avoid costly disputes in the future and ensure the continued efficient operation of the business!
In case a dispute arises between shareholders, this agreement will be the tool through which all manners will be settled. For example, what measures will be taken if an employee wants to become a shareholder? Would they even be allowed to do so? Will there be limits placed on their influence moving forward? These issues and more should be addressed in a formal agreement reviewed and signed by all shareholders.
Given the present importance of a shareholders’ agreement, it’s crucial to approach it in the most careful and professional manner possible. Fortunately, it is easy to do so by enlisting the services of a legal professional like Springfield Legals for your corporate law-related needs!
The shareholders’ agreement is a key point of reference that your business should focus on. Through the crucial information mentioned above, you can construct such a document in the most advantageous and safest way possible!
Are you looking for a reputable notary public in Ipswich to help you with your business transactions? At SIS Legal, we’re a law firm in Queensland specialising in family law, business conveyancing, income protection and succession planning for all kinds of clients. Get in touch with us today to learn more about how we can best help you!