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 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.
A Company Constitution is a mandatory company document which sets out the fundamental governance rules for the company. It covers various matters such as the structure of the company, powers and duties of the directors and shareholders, and the appointment or removal of directors. It applies to the company as a whole, and to all shareholders.
A Shareholders Agreement is a private contract between whichever shareholders sign it. It primarily governs the relationship between the shareholders such as the transfer of shares, funding requirements, how dividends will be handled, and special rights or obligations of particular shareholders.
No, a Shareholders Agreement is not mandatory. It is an optional private contract between shareholders. However, it is a very 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.
The first parties to a Shareholders Agreement are the shareholders of the company. The document does not need to be signed by all of the shareholders.
In many cases, the company itself is also a party to the Shareholders Agreement.
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. There is often some crossover between the two documents. 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 Shareholders 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.
It is not mandatory to have signatures witnessed on a Shareholders Agreement. However, witnesses can be useful for evidentiary purposes, if there is ever a dispute about the validity of the signatures at a later date.
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 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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Shareholders Agreement - sample template - Word and PDF