Shareholders Agreements and Resolutions
Business & Commercial
Protect your business, your rights, and your investment
A shareholders agreement is one of the most important legal documents for any company with more than one shareholder. It sets out the rights, responsibilities, and obligations of shareholders and directors, helping to ensure clarity, stability, and smooth governance as the company grows.
At Burgess Thomson, we provide expert advice and tailored drafting of shareholders agreements for businesses across Newcastle and NSW. Whether you’re launching a new company or formalising the arrangements in an existing one, we’ll help you put the right legal framework in place to protect your interests and reduce the risk of costly disputes.
What is a Shareholders Agreement?
A shareholders agreement is a binding contract between a company’s shareholders—and often its directors—that regulates how the company is to be run, how key decisions will be made, and what happens if ownership changes.
Unlike a company’s constitution (which is often adopted from standard templates), a shareholders agreement is highly customised and provides detailed provisions suited to the unique needs of the company and its owners.
This agreement works alongside the company’s constitution and applicable legislation, such as the Corporations Act 2001 (Cth), but allows shareholders to make bespoke arrangements on issues that matter most to them.
Why You Need a Shareholders Agreement
While everything may seem straightforward at the beginning of a business venture, relationships and circumstances can change. A well-drafted shareholders agreement helps avoid misunderstandings and provides a clear roadmap for resolving issues before they escalate.
A shareholders agreement is essential for:
- Clarifying decision-making processes and shareholder rights
- Defining director responsibilities and board control
- Providing a framework for issuing or transferring shares
- Protecting minority shareholders from unfair treatment
- Preventing deadlocks in decision-making
- Outlining exit strategies or dispute resolution procedures
Without a shareholders agreement in place, disputes are more likely to end up in court, often at significant financial and reputational cost to the business.
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Key Terms Commonly Included in a Shareholders Agreement
At Burgess Thomson, we draft shareholders agreements tailored to each client’s specific circumstances. Typical provisions include:
- Roles and Responsibilities: Clearly defining the duties and powers of directors and shareholders, including who can make which decisions, and how shareholder resolutions are passed.
- Issuing and Transferring Shares: Setting rules for how new shares can be issued or how existing shares can be transferred. This often includes a first right of refusal clause, giving existing shareholders the first opportunity to purchase shares before they are offered to external parties.
- Dividend and Profit Distribution Policies: Agreeing how and when profits will be distributed, or whether they will be reinvested in the business.
- Dispute Resolution Mechanisms: Outlining procedures for managing internal disputes, such as requiring mediation or arbitration before legal proceedings can be commenced.
- Deadlock Provisions: Providing solutions in the event of a deadlock—where shareholders cannot reach agreement on a key issue—such as buy-sell clauses or independent third-party decision-making.
- Exit Strategy and Shareholder Departure: Specifying what happens when a shareholder wishes to exit the business, including valuation methods, buyout procedures, and what happens in the event of death or incapacity.
What is the First Right of Refusal?
One of the most important protections in a shareholders agreement is the first right of refusal. This clause ensures that if a shareholder wants to sell their shares, they must first offer them to existing shareholders before they can sell to an external buyer.
This helps protect the ownership structure of the company, allowing existing shareholders to maintain control and preventing unwanted third parties from acquiring an interest in the business.
At Burgess Thomson, we ensure your agreement includes well-drafted first right of refusal provisions that balance the rights of both exiting and remaining shareholders.
Why Work with Burgess Thomson?
With decades of experience advising businesses across a wide range of industries, Burgess Thomson is trusted by clients for:
- Tailored Legal Solutions: Every shareholders agreement we draft is specific to the needs of your company and its shareholders.
- Practical Commercial Advice: We focus on outcomes that protect your business and reduce risk.
- Dispute Prevention and Resolution: We help you avoid costly misunderstandings by ensuring everyone understands their rights from the outset.
- Responsive, Client-Focused Service: You’ll work directly with experienced commercial lawyers who care about your success.
Get Expert Help with Your Shareholders Agreement
Whether you’re starting a business or formalising your current structure, it’s essential to have a professionally drafted shareholders agreement in place.
Put the right protections in place for your company’s future. Let Burgess Thomson help you draft a shareholders agreement that safeguards your rights and supports your business goals.
FAQ's
What is covered by a shareholders agreement?
A shareholders agreement can cover a number of different things, but will largely depend on the type of company you are involved with. Some general examples of common inclusions in an agreement are voting rights, shareholder rights and obligations, and how the company is managed and operated.
What is the difference between a investment agreement and a shareholders agreement?
An investment agreement is an agreement between an investor and a company, whereas a shareholders agreement is between the directors and shareholders of a company. Investment agreements usually cover the conditions of an investment. The relationship between the two is that depending on the type of investment, they may become a shareholder as a result and therefore, will be affected by the shareholders agreement.
What is a first right of refusal clause?
A first right of refusal clause is an important clause included in many shareholders agreements. The effect of this clause is that if one shareholder decides they want to sell their shares, they are offered firstly to existing shareholders who are given the right to buy or refuse to buy them. This is advantageous in some company arrangements as it ensures that the same shareholders involved in the company continue to be involved in it. For example, if there are only two shareholders in a company and one decides they want to sell their shares, the company may have a totally different complexity if the buyer of those shares is unfamiliar with the company.
Will the agreement cover shareholder resolutions?
It is quite likely that a shareholders agreement will cover shareholder resolutions. Usually, the agreement will specify who has the power to make decisions on certain matters. When shareholders make decisions on behalf of the company this is referred to as a shareholder resolution. You should also be familiar with the types of shareholder resolutions and the appropriate use of each. These can be classified as an ordinary resolution, special resolution or a unanimous resolution.
