Legally you are not required to have a shareholders agreement. However, if you do not have one you are likely to run into trouble and there is a good chance a dispute will occur.

A shareholders agreement is usually formed at the beginning of a new business venture. A shareholder agreement is a binding contractual arrangement between shareholders; it regulates rights and responsibilities such as:

  • Share transfer
  • Management structure
  • Buying and selling shares
  • Exit strategies
  • Warranties
  • Restraint of trade
  • Confidentiality
  • Appointing directors
  • Reporting requirements
  • Dividend distribution
  • Rights and obligations
  • Policies and procedures
  • Dispute resolution

A shareholders agreement prevents disputes

Having a shareholder agreement prevents disputes and allows for the smooth functioning of companies and partnerships.  Disputes often arise when shareholders wish to sell or exit, or if the company is doing particularly badly or even particularly well. It doesn’t matter how well you know the person you’re doing business with – conflict is extremely common when you’re doing business with someone.

A shareholders agreement allows for greater flexibility

Having a shareholder agreement provides you with the opportunity to tailor a contract to your needs. Otherwise you will just have to work within broad legal principles which may or may not work to your advantage.

A shareholders agreement is a private agreement

Unlike the constitution of a company, a shareholder agreement does not have to be made public. Also, only people or companies who are parties to the shareholder agreement can change it.

A shareholders agreement can result in smoothing functioning of the company

Because the shareholder agreement can divide management functions and spell out rights/obligations it can have a useful secondary use as a kind of collaborative management tool.

How can a shareholders agreement save costs?

The initial fees in setting-up a shareholder agreement is nothing compared to the costs of disputes or from bad deals which you might fall victim of in the future.

A shareholders agreement shows the business is stable

When third parties know you have a shareholder agreement it really indicates this is a stable business. This applies particularly when applying for credit and dealing with banks.

Where can I get a shareholders agreement?

You should consider meeting with an accountant, lawyer and any other business advisers you rely on when making a shareholder agreement. All parties need to be in consultation and negotiation throughout this process. An experienced business lawyer will be able to provide the best advice on the risks and the best way draft provisions to secure your rights in the agreement.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at

View Privacy Policy